Risk-Taking, Global Diversification, and Growth

Maurice Obstfeld

No 233197, Center for International and Development Economics Research (CIDER) Working Papers from University of California-Berkeley, Department of Economics

Abstract: This paper develops a stochastic continuous-time model in which international risk sharing can yield substantial welfare gains through its positive effect on expected consumption growth. The mechanism linking global diversification to growth is an attendant world portfolio shift from safe but low-yield capital into riskier high-yield capital. The presence of these two types of capital is meant to capture the idea that growth depends on the availability of an ever-increasing array of specialized, hence inherently risky, production inputs. Calibration exercises based on international consumption and stock market data imply that most countries reap large steady-state welfare gains from global financial integration.

Keywords: International Development; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 54
Date: 1993-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://ageconsearch.umn.edu/record/233197/files/cal-cider-c093-016.pdf (application/pdf)

Related works:
Journal Article: Risk-Taking, Global Diversification, and Growth (1994)
Working Paper: Risk-Taking, Global Diversification, and Growth (1993)
Working Paper: Risk-Taking, Global Diversification, and Growth (1992)
Working Paper: Risk-taking, global diversification, and growth (1992)
Working Paper: Risk-Taking, Global Diversification, and Growth (1992)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbewp:233197

DOI: 10.22004/ag.econ.233197

Access Statistics for this paper

More papers in Center for International and Development Economics Research (CIDER) Working Papers from University of California-Berkeley, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().