Minford, Patrick  ORCID: https://orcid.org/0000-0003-2499-935X, Ou, Zhirong ORCID: https://orcid.org/0000-0002-4610-7183 and Zhu, Zheyi
2022.
Is there consumer risk-pooling in the open economy? The evidence reconsidered.
Open Economies Review
33
, pp. 109-120.
10.1007/s11079-021-09622-w
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Abstract
We revisit the evidence on consumer risk-pooling and uncovered interest parity. Widely used single-equation tests are strongly biased against both. Using the full-model, Indirect Inference test, which is unbiased and has Goldilocks power according to Monte Carlo experiments, we find that both the risk-pooling hypothesis and its weaker UIP version are generally accepted as part of a full world DSGE model. The fact that the risk-pooling hypothesis, with its implication of strong cross-border consumer linkage, has passed this test with generally the highest p-value, suggests that it deserves serious attention from policy-makers looking for a relevant model with which to discuss international monetary and other business cycle policies.
| Item Type: | Article |
|---|---|
| Date Type: | Publication |
| Status: | Published |
| Schools: | Schools > Business (Including Economics) |
| Additional Information: | This article is licensed under a Creative Commons Attribution 4.0 International License |
| Publisher: | Springer Verlag |
| ISSN: | 0923-7992 |
| Date of First Compliant Deposit: | 25 March 2021 |
| Date of Acceptance: | 25 March 2021 |
| Last Modified: | 28 Jul 2023 10:03 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/140067 |
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