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Cited by 648

The DOI matches its Crossref record; 43 of the 43 references it cites were found in a registry or an index.

International Risk Sharing and the Transmission of Productivity Shocks

CORSETTI, GIANCARLO, DEDOLA, LUCA, LEDUC, SYLVAIN·2008·Review of Economic Studies
DOI 10.1111/j.1467-937x.2008.00475.x
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Abstract

This paper shows that standard international business cycle models can be reconciled with the empirical evidence on the lack of consumption risk sharing. First, we show analytically that with incomplete asset markets productivity disturbances can have large un-insurable effects on wealth, depending on the value of the trade elasticity and shock persistence. Second, we investigate these findings quantitatively in a model calibrated to the U.S. economy. With the low trade elasticity estimated via a method of moments procedure, the consumption risk of productivity shocks is magnified by high terms of trade and real exchange rate (RER) volatility. Strong wealth effects in response to shocks raise the demand for domestic goods above supply, crowding out external demand and appreciating the terms of trade and the RER. Building upon the literature on incomplete markets, we then show that similar results are obtained when productivity shocks are nearly permanent, provided the trade elasticity is set equal to the high values consistent with micro-estimates. Under both approaches the model accounts for the low and negative correlation between the RER and relative (domestic to foreign) consumption in the data the Backus Smith puzzle.

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Metadata

Authors
CORSETTI, G., DEDOLA, L., & LEDUC, S.
Venue
Review of Economic Studies
Publisher
Oxford University Press (OUP)
Published
2008-04
Volume
75
Issue
2
Pages
443-473
ISSN
  • 0034-6527 (ISSN-L)
  • 1467-937X
DOI
10.1111/j.1467-937x.2008.00475.x
OpenAlex
W2157183053
Cited by
648
References
43
FWCI
85.73
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: International Risk Sharing and the Transmission of Productivity Shocks. https://app.cochat.ai/papers/10.1111/j.1467-937x.2008.00475.x
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CORSETTI, G., DEDOLA, L., & LEDUC, S. (2008). International Risk Sharing and the Transmission of Productivity Shocks. Review of Economic Studies. https://doi.org/10.1111/j.1467-937x.2008.00475.x

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Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.