Financial Intermediation, International Risk Sharing, and Reserve Currencies

I model the equilibrium risk sharing between countries with varying financial development The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a...

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Vydané v:The American economic review Ročník 107; číslo 10; s. 3038 - 3071
Hlavný autor: Maggiori, Matteo
Médium: Journal Article
Jazyk:English
Vydavateľské údaje: Nashville American Economic Association 01.10.2017
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ISSN:0002-8282, 1944-7981
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Abstract I model the equilibrium risk sharing between countries with varying financial development The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier losses. Its currency emerges as the reserve currency because it appreciates during crises, thus providing a good hedge. I provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing.
AbstractList I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier losses. Its currency emerges as the reserve currency because it appreciates during crises, thus providing a good hedge. I provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing. (JEL E44, F14, F32, G01, G15, G21)
I model the equilibrium risk sharing between countries with varying financial development The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier losses. Its currency emerges as the reserve currency because it appreciates during crises, thus providing a good hedge. I provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing.
Author Maggiori, Matteo
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Snippet I model the equilibrium risk sharing between countries with varying financial development The most financially developed country takes greater risks because...
I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because...
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SubjectTerms Compensation
Crises
Currency
Developed countries
Economic crisis
Economic development
Economic models
Financial intermediaries
Financial liabilities
Financiers
International finance
International trade
Investment risk
Money
Net worth
Public debt
Reserve currencies
Risk
Risk sharing
Sharing
Spreading risk
Wealth
Title Financial Intermediation, International Risk Sharing, and Reserve Currencies
URI https://www.jstor.org/stable/44871777
https://www.proquest.com/docview/1944245524
Volume 107
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