TY - JOUR
T1 - A provincial view of consumption risk sharing in Korea:Asset classes as shock absorbers
AU - Pontines, Victor
PY - 2020
Y1 - 2020
N2 - Using a unique data set on provincial net factor income flows disaggregated across the three asset classes of debt,
equity and Foreign Direct Investment reinvested earnings in Korea, we investigated how these asset channels
impacted consumption risk sharing during the Global Financial Crisis and the European sovereign debt crisis.
Adopting spatial panel methods, this study found in the main that net factor flows of debt, equity and Foreign
Direct Investment retained earnings have all contributed favourably to consumption risk sharing during these
episodes, with Foreign Direct Investment retained earnings robust in its positive contribution in buffering shocks
to consumption. These results suggest that one of the alleged benefits of financial integration in terms of providing
the insurance needed to cushion the economy against adverse shocks is tangible and real at least in the
context of Korea. We also obtain evidence that apart from asset channels, the combination of the government's
social transfer payments and a certain measure of labour mobility help to contribute in mitigating shocks to
consumption.
AB - Using a unique data set on provincial net factor income flows disaggregated across the three asset classes of debt,
equity and Foreign Direct Investment reinvested earnings in Korea, we investigated how these asset channels
impacted consumption risk sharing during the Global Financial Crisis and the European sovereign debt crisis.
Adopting spatial panel methods, this study found in the main that net factor flows of debt, equity and Foreign
Direct Investment retained earnings have all contributed favourably to consumption risk sharing during these
episodes, with Foreign Direct Investment retained earnings robust in its positive contribution in buffering shocks
to consumption. These results suggest that one of the alleged benefits of financial integration in terms of providing
the insurance needed to cushion the economy against adverse shocks is tangible and real at least in the
context of Korea. We also obtain evidence that apart from asset channels, the combination of the government's
social transfer payments and a certain measure of labour mobility help to contribute in mitigating shocks to
consumption.
U2 - 10.1016/j.jjie.2020.101063
DO - 10.1016/j.jjie.2020.101063
M3 - Article
SN - 0889-1583
VL - 55
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
ER -