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Debt Crises and Risk Sharing: The Role of Markets versus Sovereigns

Author

Listed:
  • Sørensen, Bent E
  • Kalemli-Özcan, Sebnem
  • Luttini, Emiliano
Abstract
Using a variance decomposition of shocks to GDP, we quantify the role of international factor income, international transfers, and saving in achieving risk sharing during the recent European crisis. We focus on the sub-periods 1990--2007, 2008--2009, and 2010 and consider separately the European countries hit by the sovereign debt crisis in 2010. We decompose risk sharing from saving into contributions from government and private saving and show that fiscal austerity programs played an important role in hindering risk sharing during the sovereign debt crisis.

Suggested Citation

  • Sørensen, Bent E & Kalemli-Özcan, Sebnem & Luttini, Emiliano, 2013. "Debt Crises and Risk Sharing: The Role of Markets versus Sovereigns," CEPR Discussion Papers 9541, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9541
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    More about this item

    Keywords

    Capital markets; Income insurance; International financial integration;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F15 - International Economics - - Trade - - - Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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