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Working Paper
Risk sharing of disaggregate macroeconomic and idiosyncratic shocks
Comparing the degree to which idiosyncratic and disaggregate macro shocks (such as regional and industry shocks) are not shared in the economy provides greater understanding of why the economy lacks risk-sharing arrangements in specific areas and can suggest areas where the economy?s risk-sharing capability could be enhanced. The authors find that a negligible amount of risk (around 10 percent) is shared in the aggregate, about 50 percent is shared within regions and industries, while the remaining 40 percent is not shared with other households. These findings suggest that given the low level ...
Conference Paper
Macroprudential policies in open emerging economies
Working Paper
Some intranational evidence on output-inflation tradeoffs
In a seminal paper, Lucas (1973) provided the theoretical relationship between aggregate demand and real output based on relative price confusion at the individual market level. Ball, Mankiw, and Romer (BMR, 1988) derive the same relation using a New Keynesian framework. Even though both theories predict a positive relationship between nominal shocks and cyclical movements in real output, they are distinguished by two notable differences. First, according to New Keynesian theory, nominal shocks have a smaller effect on real output for high inflation countries since prices are adjusted more ...
Working Paper
Intranational business cycles in the United States
We employ intranational data for the United States from 1978-1991 to re-explore two discrepancies between international real business cycle models and data (so called 'anomalies') that have been highlighted by Backus, Kehoe and Kydland (1993). The benefit to our approach is that the analysis of business cycles within one country is a natural experiment for understanding the 'anomalies' found in international business cycles since, as in the model, there are no tariffs or trade barriers between states in the U.S. and there is only one currency. ; Similar to the evidence for international ...
Working Paper
The sources of fluctuations within and across countries
This paper reviews the evidence on the sources of business cycles within and across countries and the implications for the importance of borders in business cycles. A simple econometric model is presented and applied to within-U.S. and cross-country data in order to provide a framework for interpreting the literature. Using these estimates as a benchmark, data issues, alternative models, and still other approaches to quantifying sources of comovement are surveyed. Overall, the evidence suggests three general conclusions. First, common shocks are less important in international fluctuations ...
Working Paper
Risk sharing by households within and across regions and industries
Cochrane (1991) and Mace (1991) test if risk sharing across households is complete in the sense that household consumption moves one-for-one with aggregate consumption. In their studies the source of income risk is idiosyncratic, and agents can share risk across the entire economy. Using a sample of households from the Panel Study on Income Dynamics (PSID), we explore whether individuals diversify the risk associated within their industries and regions, as well as across industries and regions. We find that there is stronger evidence of within region and industry risk sharing than across ...