Consumption Risk Sharing and Its Implications for Financial Integration: The Case of Nine East Asian Countries

Jenny Corbett, Achmad Maulana

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    Using three easily measured variables – growth in aggregate output, change in net factor income and change in national saving – this paper estimates the degree of consumption smoothing by a group, East Asia. Using the Penn World Tables data for nine East Asian countries, we provide evidence that about 22 percent of shocks to GDP are smoothed via a credit market channel while the international capital market is almost insignificant. Furthermore, we find that around 75 percent of shocks to GDP remain unsmoothed. Portfolio investment intensity calculations suggest that, of this already small degree of smoothing achieved by access to international capital markets, a disproportionately small share is coming from within the region for many countries, although some countries are achieving a more balanced geographical spread of their portfolio investments. Given these results, we argue that countries in the region may benefit from having more open financial systems, which they could use as means of increasing the consumption risk sharing.
    Original languageEnglish
    Title of host publicationLinkages Between Real and Financial Aspects of Economic Integration in East Asia
    Editors Christopher Findlay, Friska Parulian and Jenny Corbett
    Place of PublicationJakarta
    PublisherEconomic Research Institute for ASEAN and East Asia (ERIA)
    Pages60-93
    Edition1st
    ISBN (Print)9786028660181
    Publication statusPublished - 2010

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