TY  - JOUR
AU  - Cole,Harold L.
AU  - Obstfeld,Maurice
TI  - Commodity Trade and International Risk Sharing:  How Much Do Financial Markets Matter?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3027
PY  - 1991
Y2  - December 1991
UR  - http://www.nber.org/papers/w3027
L1  - http://www.nber.org/papers/w3027.pdf
N1  - Author contact info:
Harold L. Cole
Economics Department
University of Pennsylvania
3718 Locust Walk
160 McNeil Building
Philadelphia, PA 19104
Tel: 215-898-7788
E-Mail: colehl@sas.upenn.edu

Maurice Obstfeld
Department of Economics
University of California, Berkeley
530 Evans Hall #3880
Berkeley, CA 94720-3880
Tel: 510/643-9646
Fax: 510/642-6615
E-Mail: obstfeld@econ.berkeley.edu
M2  - featured in NBER digest on 1988-11-01
AB  - This paper evaluates the gains from international risk sharing in some simple general-equilibrium models with output uncertainty. Under empirically plausible calibration, the Incremental loss from a ban on international portfolio diversification is estimated to be quite small--0.15  percent of output per year is a representative figure. Even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology. The paper argues that the small magnitude of potential trade gains, when coupled with small costs  of cross-border financial transactions, may explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility.
ER  -