题目：Frictions, Heterogeneous Preferences and International Consumption Risk Sharing
主讲人：Meixin Guo, Assistant Professor, Tsinghua University
In contrast to goods market frictions, the role of financial market frictions is not well understood in the international macroeconomics literature. This paper provides evidence on the significance of financial frictions in explaining the lack of international consumption risk sharing, in addition to goods market frictions. Using the gravity estimation approach developed by Fitzgerald (2007) to measure frictions, the paper augments the model to allow for heterogeneous country preferences in a multi-country setting. Consequently, estimating the gravity equation requires a new set of asymmetric importer-exporter dummies. In contrast to earlier studies, results from the likelihood ratio tests reject the null hypothesis of frictionless financial markets within a group of 22 developed countries after controlling for the heterogeneity across country pairs. However, the tests associated with high dimensional gravity equations have a large size distortion (the type I error). Hierarchical Bayesian estimation can control for the large dimensionality of the parameter space and reduces the size distortion. The Bayesian results select the model with both financial and goods market frictions over the model with goods trade costs only. Furthermore, I also find a large home bias in consumption for each country, decreasing trade costs in goods markets, and a negative relationship between the risk sharing level and the volatility of output growth across countries.
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