Financial Globalization, International Business Cycles, And Consumption Risk Sharing

In spite of two decades of financial globalization, consumption-based indicators do not seem to signal more international risk sharing. The authors argue that consumption risk sharing among industrialised countries has actually increased - in particular since the 1990s - but that standard consumption-based measures of risk sharing - such as the volatility of consumption conditional on output or international consumption correlations - have been unable to detect this increase. The reason is that consumption has also been affected by the concurrent decline in the volatility of output growth in most industrialised countries since the 1980s.