Minford, Patrick  ORCID: https://orcid.org/0000-0003-2499-935X, Ou, Zhirong ORCID: https://orcid.org/0000-0002-4610-7183 and Zhu, Zheyi
2025.
Testing for consumer risk-pooling in the open economy - further results.
Open Economies Review
36
, pp. 901-920.
10.1007/s11079-024-09782-5
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Official URL: https://doi.org/10.1007/s11079-024-09782-5
Abstract
In this supplement to Minford et al. (2021), we revisit the `puzzle' in open economy studies that evidence of international risk-sharing is hardly seen despite active cross-country financial markets. We reassess both risk-pooling via state-contingent bonds, and uncovered interest parity -- both were believed to be different, and spuriously rejected, in previous work -- in the context of a full DSGE model of the New Keynesian type. We prove that the two models are identical, both analytically and numerically. When tested as part of such a full DSGE model by indirect inference which circumvents the bias of single-equation tests, we find universal evidence of international risk-sharing.
| Item Type: | Article |
|---|---|
| Date Type: | Publication |
| Status: | Published |
| Schools: | Schools > Business (Including Economics) |
| Publisher: | Springer |
| ISSN: | 0923-7992 |
| Date of First Compliant Deposit: | 15 August 2024 |
| Date of Acceptance: | 9 July 2024 |
| Last Modified: | 02 Sep 2025 14:36 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/171362 |
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