Debt Crises and Risk-Sharing: The Role of Markets versus Sovereigns
Version of Record online: 30 DEC 2013
© The editors of The Scandinavian Journal of Economics 2013.
The Scandinavian Journal of Economics
Volume 116, Issue 1, pages 253–276, January 2014
How to Cite
Kalemli-Ozcan, S., Luttini, E. and Sørensen, B. (2014), Debt Crises and Risk-Sharing: The Role of Markets versus Sovereigns. The Scandinavian Journal of Economics, 116: 253–276. doi: 10.1111/sjoe.12043
- Issue online: 30 DEC 2013
- Version of Record online: 30 DEC 2013
- Capital markets;
- income insurance;
- international financial integration;
Using a variance decomposition of shocks to gross domestic product (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 subperiods 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.