Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 33, No. 1, pp.73-97
ISSN: 1225-0279 (Print)
Print publication date 29 Feb 2020
Received 25 Jan 2020 Revised 05 Feb 2020 Accepted 05 Feb 2020

Consumption Risk Sharing in ASEAN: A Comparison of the ASEAN+3, East Asia, the OECD, and the Eurozone

Joongsan Ko
Joongsan Ko, Doctoral Candidate, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul, Republic of Korea., Tel: +82-2-880-6359 joongsan@snu.ac.kr


Copyright Ⓒ 2020

JEL Classification: F02, F15, F36, F41

Abstract

On the basis of regression of consumption on output, we develop a new approach to identify a structural break in business cycles. Using this approach, we find that a structural change in the trend and cycle in Korea occurred in 1993 and that the business cycles in Korea started to show the regularities of emerging market business cycles beginning in 1993. To explain these, we estimate the parameters of the productivity process in Korea, using data on Solow residuals. Our estimates show that the relative importance of trend growth shocks in the post-break period increased by a factor of 2.56 from that in the pre-break period.

Keywords:

ASEAN, Eurozone, Common currency, Consumption risk sharing, Financial integration

Acknowledgments

I thank anonymous referees for the helpful comments and suggestions.

References

  • Almekinders, G., M. A. Mourmouras, M. J. P. Zhou, and S. Fukuda. “ASEAN financial integration.” International Monetary Fund (2015): 15-34. [https://doi.org/10.5089/9781484386491.001]
  • Andersson, L. “Fiscal flows and financial markets: To what extent do they provide risk sharing within Sweden?” Regional Studies 42 (No. 7 2008): 1003-1011. [https://doi.org/10.1080/00343400701654129]
  • Arreaza, A., B. E. Sørensen, and O. Yosha. “Consumption smoothing through fiscal policy in OECD and EU countries.” National Bureau of Economic Research (1998). [https://doi.org/10.3386/w6372]
  • Asdrubali, P., and S. Kim. “Dynamic risksharing in the United States and Europe.” Journal of Monetary Economics 51 (No. 4 2004): 809-836. [https://doi.org/10.1016/j.jmoneco.2003.09.002]
  • Asdrubali, P., and S. Kim. “Incomplete intertemporal consumption smoothing and incomplete risk sharing.” Journal of Money Credit and Banking 40 (No. 7 2008): 1521-1531. [https://doi.org/10.1111/j.1538-4616.2008.00170.x]
  • Asdrubali, P., S. Kim, F. Pericoli, and P. Poncela. “New Risk Sharing Channels in OECD Countries: A Heterogeneous Panel VAR.” JRC Working Papers in Economics and Finance (2018).
  • Asdrubali, P., B. E. Sørensen, and O. Yosha. “Channels of interstate risk sharing: United States 1963-1990.” The Quarterly Journal of Economics 111 (No. 4 1996): 1081-1110. [https://doi.org/10.2307/2946708]
  • Balli, F., S. A. Basher, and R. Jean Louis. “Channels of risk-sharing among Canadian provinces: 1961-2006.” Empirical Economics 43 (No. 2 2012): 763-787. [https://doi.org/10.1007/s00181-011-0488-6]
  • Balli, F., F. M. Pericoli, and E. Pierucci. “Globalization and international risk-sharing: The role of social and political integration.” European Journal of Political Economy 55 (2018): 324-345. [https://doi.org/10.1016/j.ejpoleco.2017.12.006]
  • Beyer, A., J. A. Doornik, and D. F. Hendry. “Constructing historical euro‐zone data.” The Economic Journal 111 (2001): F102-F121. [https://doi.org/10.1111/1468-0297.00601]
  • Borge, L.-E., and E. Matsen. “Public employment and regional risk sharing.” The Scandinavian Journal of Economics 106 (No. 2 2004): 215-230. [https://doi.org/10.1111/j.0347-0520.2004.00364.x]
  • Buettner, T. “Fiscal federalism and interstate risk sharing: empirical evidence from Germany.” Economics Letters, 74 (No. 2 2002): 195-202. [https://doi.org/10.1016/S0165-1765(01)00548-1]
  • Cortinhas, C. “Intra-industry trade and business cycles in ASEAN.” Applied Economics 39 (No. 7 2009): 893-902. [https://doi.org/10.1080/00036840500461907]
  • Demyanyk, Y. S., C. Ostergaard, and B. E. Sørensen. “Risk sharing and portfolio allocation in EMU.” Available at SSRN 1317692 (2008). [https://doi.org/10.2139/ssrn.1317692]
  • Du, J., Q. He, and O. M. Rui. “Channels of interprovincial risk sharing in China.” Journal of Comparative Economics 39 (No. 3 2011): 383-405. [https://doi.org/10.1016/j.jce.2011.03.005]
  • Elliott, G., T. J. Rothenberg, and J. H. Stock. “Efficient tests for an autoregressive unit root.” Econometrica 64 (1996): 813-836. [https://doi.org/10.2307/2171846]
  • Hepp, R., and J. von Hagen. “Interstate risk sharing in Germany: 1970- 2006.” Oxford Economic Papers 65 (No. 1 2013): 1-24. [https://doi.org/10.1093/oep/gps018]
  • Hoffmann, M. “Has Consumption Risk Sharing Increased in Asia (and Elsewhere)?” Seoul Journal of Economics 24 (No. 4 2011): 551- 574.
  • Jüßen, F. “Interregional risk sharing and fiscal redistribution in unified Germany.” Regional Science 85 (No. 2 2006): 235-255. [https://doi.org/10.1111/j.1435-5957.2006.00085.x]
  • Kalemli-Ozcan, S., B. E. Sørensen, and O. Yosha. “Risk sharing and industrial specialization: Regional and international evidence.” American Economic Review 93 (No. 3 2003): 903-918. [https://doi.org/10.1257/000282803322157151]
  • Kim, D., and J. Sheen. “Consumption risk-sharing within Australia and with New Zealand.” Economic Record 83 (2007): 46-59. [https://doi.org/10.1111/j.1475-4932.2007.00375.x]
  • Kim, S., S. H. Kim, and Y. Wang. “Regional versus global risk sharing in East Asia.” Asian Economic Papers 3 (No. 3 2004): 182-201. [https://doi.org/10.1162/1535351054825210]
  • Kim, S., S. H. Kim, and Y. Wang. “Financial integration and consumption risk sharing in East Asia.” Japan and the World Economy 18 (No. 2 2006): 143-157. [https://doi.org/10.1016/j.japwor.2004.10.001]
  • Ko, J. “Intranational consumption risk sharing in South Korea: 2000- 2016.” Asian Economic Journal (in press).
  • Mélitz, J., and F. Zumer. “Interregional and international risk-sharing and lessons for EMU.” Carnegie-Rochester Conference Series on Public Policy 51 (1999): 149-188. [https://doi.org/10.1016/S0167-2231(00)00008-7]
  • Ng, S., and P. Perron. “Lag length selection and the construction of unit root tests with good size and power.” Econometrica 69 (No. 6 2001): 1519-1554. [https://doi.org/10.1111/1468-0262.00256]
  • Plummer, M. G. “ASEAN–EU economic relationship: Integration and lessons for the ASEAN economic community.” Journal of Asian Economics 17 (No. 3 2006): 427-447. [https://doi.org/10.1016/j.asieco.2006.04.004]
  • Rillo, A. D. “ASEAN financial integration: opportunities, risks, and challenges.” Public Policy Review 14 (No. 5 2018): 901-924.
  • Shin, K. “Determinants of Bilateral Risk-Sharing across Countries.” Korean Journal of Money & Finance 11 (No. 1 2006): 129-158 (in Korean).
  • Sørensen, B. E., and O. Yosha. “International risk sharing and European monetary unification.” Journal of International Economics 45 (No. 2 1998): 211-238. [https://doi.org/10.1016/S0022-1996(98)00033-6]
  • Wang, Y. “Financial cooperation and integration in East Asia.” Journal of Asian Economics 15 (No. 5 2004): 939-955. [https://doi.org/10.1016/j.asieco.2004.09.004]
  • Yehoue, E. B. “International risk-sharing and currency unions: The CFA zones.” Journal of International Development 23 (No. 7 2011): 936-958. [https://doi.org/10.1002/jid.1735]