@techreport{NBERw5203,
 title = "What Can Explain the Apparent Lack of International Consumption Risk    Sharing?",
 author = "Karen K. Lewis",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "5203",
 year = "1995",
 month = "August",
 URL = "http://www.nber.org/papers/w5203",
 abstract = {Recent research in international business cycles based upon complete markets has found that international consumption correlations are lower than predicted by the standard risk-sharing implications of these models.  In this paper, I use regression tests to ask whether two different types of explanations can help explain this result. First, I consider whether non-separabilities between tradeables and non-tradeable leisure or goods can explain the puzzle.  Surprisingly, non-separabilities explain only a tiny fraction of the variation in tradeables consumption across countries.  Furthermore, risk-sharing in tradeables is rejected.  Second, I examine the effects of capital market restrictions on aggregate consumption risk-sharing by countries.  While rejections of risk-sharing are stronger for countries facing more severe capital market restrictions, risk-sharing is still rejected for the unrestricted group of countries.  Therefore, risk-sharing does not appear to be resolved by either explanation alone.  However, when I allow for both non-separabilities and certain market restrictions, risk-sharing among unrestricted countries is not rejected.  This evidence suggests that a combination of these two effects may be necessary to explain consumption risk-sharing across countries.},
}