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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Vydáno v:The American economic review Ročník 107; číslo 10; s. 3038 - 3071
Hlavní autor: Maggiori, Matteo
Médium: Journal Article
Jazyk:angličtina
Vydáno: Nashville American Economic Association 01.10.2017
Témata:
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
ISSN:0002-8282, 1944-7981
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Shrnutí: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.
Bibliografie:ObjectType-Article-1
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20130479