NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Sebnem Kalemli-Ozcan, Emiliano E. Luttini, Bent Sorensen

NBER Working Paper No. 19914
Issued in February 2014
NBER Program(s):   IFM

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.

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Document Object Identifier (DOI): 10.3386/w19914

Published: Sebnem Kalemli-Ozcan & Emiliano Luttini & Bent Sørensen, 2014. "Debt Crises and Risk-Sharing: The Role of Markets versus Sovereigns," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 253-276, 01.

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