Cover Page; Title Page; Copyright Page; Contents; 1. Introduction; 2. Theoretical Motivations; 3. An Illustration on Conventional Panel and Nonstationary Panel Approaches; 3.1 Conventional Panel; 3.2 Nonstationary panel; 4. Data and Sample Selection; 4.1. Dataset; 4.2. Sample Selection; Table 1. Panel Unit Root and Cointegration Test Results (45 countries); Table 2. Conventional Panel Regression Results under Different Specifications; 5. Interpreting the Risk Sharing Relationship; 5.1. FMOLS and DOLS; 5.2. Conventional Panel Regression Results
Table 3. Level Panel Regression Results under Different Specifications5.3. Nonstationary Panel Regression Results; Table 4A. Country Group Cointegration Coefficient Estimates; Table 4B. Country Group Cointegration Coefficient Estimates (Countries passed individual tests); 6. Cross-country risk sharing patterns; 7. Conclusion; Figure: Cross-country Risk Sharing and Financial Assets; Appendix I: Studies using Conventional Panel Analysis 35; Appendix II: Technically Illustration on Conventional and Nonstationary Panel; Appendix III: Group-mean FMOLS Estimator
Table A1. Individual and Panel Unit Root Test Results 1950-2008 (45 countries)Table A2. Individual and Panel Cointegration Test Results 1950-2008; Table A3a. Cointegration coefficient estimates (45 countries); Table A3b. Cointegration coefficient estimates (21 countries); Reference; Footnotes
Summary
This paper estimates an empirical nonstationary panel regression model that tests long-run consumption risk sharing across a sample of OECD and emerging market (EM) countries. This is in contrast to the existing literature on consumption risk sharing, which is mainly about risks at business cycle frequency. Since our methodology focuses on identifying cointegrating relationships while allowing for arbitrary short-run dynamics, we can obtain a consistent estimate of long-run risk sharing while disregarding any short-run nuisance factors. Our results show that long-run risk sharing in OECD countries increased more than that in EM countries during the past two decades
