What We Are Missing in the Analysis of Intranational Consumption Risk Sharing: Empirical Evidence from South Korea

고중산 한국무역학회 2023 Journal of Korea trade Vol.27 No.6

Purpose – This study theoretically points out that when measuring the degree of intranational consumption risk sharing, the cross-sectional variance decomposition method developed by Asdrubali, Sørensen and Yosha (1996) can result in biased estimates. This occurs because the method does not classify money flows for risk sharing into intranational and international categories. To overcome these limitations, the study proposes the use of Asdrubali and Kim So-Young’s (2011) method. Design/methodology – This study investigates, first, that analyzing intranational consumption risk sharing based on the variance decomposition method will inevitably produce biased estimation. Second, it examines how Asdrubali and Kim So-Young’s (2011) method estimates the effects of risk sharing by separating the domestic sources of money from overseas ones. As empirical evidence for these theoretical discussions, a comparative analysis is performed by using both methodologies to estimate South Korea’s intranational and international consumption risk sharing. Findings – The empirical results confirm that the variance decomposition method produced a biased estimation of the degree of intranational consumption risk sharing. Specifically, in South Korea, the degree of consumption risk sharing via capital and credit markets was overestimated, and that via the tax-transfer system was underestimated. The results also prove that Asdrubali and Kim So-Young’s (2011) method is effective not only in reducing the bias of the estimation results but also in measuring the degree of international consumption risk sharing for individual countries. Originality/value – Despite numerous studies that have capitalized on the variance decomposition method, little scholarly attention has been paid to the occurrence of bias in the method. Hence, this study makes a noteworthy academic contribution by addressing this under-researched area. Additionally, it stands out as the first of its kind to pioneer the utilization of Asdrubali and Kim So- Young’s (2011) method, offering a groundbreaking analysis of intranational and international consumption risk sharing.

Has Consumption Risk Sharing Increased in Asia (and Elsewhere)?

Mathias Hoffmann 서울대학교 경제연구소 2011 Seoul journal of economics Vol.24 No.4

What impact has financial globalization had on risk sharing? In theory, financial globalization should improve international consumption risk sharing. While the answer to this question is of utmost policymaking concern, results in the empirical literature are inconclusive. The paper surveys the extant literature and tries to identify which factors influence the answer: i) consumption risk sharing seems to have increased among industrialized countries but much less in the emerging world. ii) The increase in risk sharing is generally found to be stronger in studies that focus on the trends rather than purely cyclical variation in the data. iii) globalization has not only affected consumption responses to output shocks but also the structure of these shocks themselves. This, in turn, has affected the measurement of risk sharing. The paper examines the relevance of these points on a sample of East Asian Economies. My results indicate that risk sharing in East Asia has started to increase once the region had recovered from the Asian crisis.

이질적 위험회피도 하에서의 소비위험분산 가설 검정

송정석(Jeongseok Song) 한국경제연구학회 2015 한국경제연구 Vol.33 No.1

소비위험분산의 이론에 따르면 경제주체의 소비변화는 해당 경제주체의 소득변화에 대하여 독립적이다. 반면 대부분의 기존 연구는 소비위험분산은 현실적으로 성립하지 않는다는 실증 연구 결과를 제시한다. 이러한 기존 연구들은 경제주체들의 위험회피도가 동질적이라고 가정한 반면 최근 일부 연구들은 소비위험분산 가설의 검정을 위해 이질적 위험회피도를 고려해야 한다는 의견을 제시하였다. 본 연구는 한국의 시도지역을 대상으로 소비위험분산 가설과 위험회피도의 이질성 여부를 단일한 회귀모형 하에서 검정한다. 본 연구의 실증분석 결과에 따르면 위험회피도가 동질적일 경우 소비위험분산 가설은 일부 지역들 사이에서는 기각되며 나머지 지역들 사이에서는 기각되지 않는다. 반면 위험회피도가 이질적일 경우 소비위험분산 가설은 기각되지 않음을 본 연구의 실증결과는 제시한다. The theory of consumption risk-sharing claims that consumption change is independent of income change. However, most empirical studies show that consumption risk-sharing does not hold in the real economy. Unlike previous studies assuming homogeneous risk-aversion, some recent papers suggest that heterogeneous risk-aversion should be considered in testing the hypothesis of consumption risk-sharing. Using Korean data, we test both consumption risk-sharing and risk-aversion heterogeneity within a unified regression model. We find that the hypothesis for consumption risk-sharing is not rejected under heterogeneous risk-aversion, and the risk-sharing hypothesis is rejected for some instances but not rejected in others under homogeneous risk-aversion.

영문 : EU 지역간 소비위험분산에 대한 실증연구

박유진 ( You Jin Park ),송정석 ( Jeong Seok Song ) 국제지역학회 2009 국제지역연구 Vol.13 No.2

본 연구는 EU 회원국들의 소비위험분산 행위를 살펴보기 위해 기존의 소비위험분산측정방법에 소위 이례적 관측치 (outlier)를 고려하여 기법을 도입하고 있다. 본 연구는 단순히 소비위험분산을 측정하는 기존의 방법에서 더 나아가 어느 국가 혹은 지역들이 소비위험분산에 특히 더 기여하는지를 밝히고자 한다. 이를 위해 기존 계량경제학의 회귀분석에서 간과되었던 특정 관측치의 회귀분석결과에 대한 영향력 분석을 DFFITS와 DFBETAS 접근법을 사용하였다. 이같은 소비위험분산 측정 결과 EU 지역의 소비위험분산 정도는 서유럽국가와 비교적 최근에 EU에 가입한 동유럽국가로 크게 이분되어 있음을 발견하였다. By measuring the consumption risk sharing for the EU regions, we evaluate the performance of various risk sharing channels for the EU. We identify which countries are likely to form the highest risk sharing group among the EU regions by using the DFFITS and DFBETAS diagnostics derived in a statistical regression. Our finding suggests that most western European countries seem to display homogeneous degree of risk sharing. In addition, our result confirms that high risk sharing regions as well as low risk sharing regions are mainly located in many eastern European countries that joined the EU later than western European countries, and implies that the EU members are still dichotomized at large in terms of consumption risk sharing.

The Aging Effects on the Channels of Consumption Risk-Sharing for the ED

( Doo Jin Ryul ),( Jeong Seok Song ) 한국국제경제학회 2015 한국국제경제학회 동계학술대회 Vol.2015 No.-

This paper studies the relation between aging phenomenon and consumption risk-sharing among the ED countries. We relate the aging effect to three consumption risk sharing channels: capital channel, credit market channel, and federal government channel. We empirically find that fast aging encourages the consumption risk-sharing via the fiscal channels and, to the limited extent, observe that such a finding is consistent with a simple overlapping generation model.

An Empirical Study on the Consumption Risk Sharing across the EU Regions

박유진,송정석 국제지역학회 2009 국제지역연구 Vol.13 No.2

By measuring the consumption risk sharing for the EU regions, we evaluate the performance of various risk sharing channels for the EU. We identify which countries are likely to form the highest risk sharing group among the EU regions by using the DFFITS and DFBETAS diagnostics derived in a statistical regression. Our finding suggests that most western European countries seem to display homogeneous degree of risk sharing. In addition, our result confirms that high risk sharing regions as well as low risk sharing regions are mainly located in many eastern European countries that joined the EU later than western European countries, and implies that the EU members are still dichotomized at large in terms of consumption risk sharing.

동아시아 금융통합의 가능성 검증

강보경 한국산업경제학회 2008 산업경제연구 Vol.21 No.3

본 연구는 동아시아 경제의 국제금융시장과의 통합정도와 몇 가지 주요거시경제변수에 미치는 영향에 대하여 분석하고 정책적 함의를 유도하기 위해 다음 문제를 검토한다. 첫째, 금융위기 이후 동아시아는 국제금융시장과의 통합정도가 증가했는가? 둘째, 동아시아 국가는 국제금융시장과의 통합이 진전됨에 따라 이익을 얻었는가? 셋째, 자유로운 자본유출입을 고려하면 동아시아는 어떤 환율상장제도를 채택할 수 있겠는가? 넷째, 동아시아 각 채권국은 얼마나 많은 순대외자산을 보유하고 있는가? Lane and Milesi-Ferretti(2006)의 자료를 기초로 분석한 결과에 의하면 동아시아 경제는 아시아 금융위기 이후 국제금융시장과의 통합은 진전하고 있다. 이 금융통합의 진전이 동아시아 경제변수에 미치는 영향을 보기 위해 Feldstein and Horioka(1980)가 주장한 방법을 사용하여 저축과 투자의 상관관계를 검토한 결과 유로권 경제에 비해 동아시아 경제 쪽이 높고, S/Y에 비해 I/Y가 크게 적다. 국제금융시장과의 통합이 진전하고 있다는 검증결과를 바탕으로 소비의 위험공유가 동아시아에서 향상되었는가를 Asdrubali, Pierfederico, Sorensen, and Yosha(1996)와 Ravallion and Chaudhuri(1997) 모형을 이용하여 검증한 결과 동아시아에서 국제적인 자본시장과 신용시장을 통한 소비의 평준화 정도가 낮고, 금융자산을 상호 보유함으로써 동아시아 경제 고유의 충격을 평준화하는 정도도 유로권 경제보다 낮다. 이들 결과로부터 동아시아 경제에서 위험공유의 정도를 높임으로써 사회후생을 증가시킬 수 있지만, 현 시점에서 국제금융시장과의 통합정도가 상승한 것만으로는 통화통합은 소비의 평준화를 위한 해결책이 될 수 없다. 과도한 대외자산보유도 위험공유 효과를 줄어들게 함으로 동아시아 각 경제주체는 순대외자산 보유수준을 낮추어야 한다. The saving-investment correlation in East Asia is higher than those of the Euro area economies and the I/Y shows large drop compared with the S/Y. It is an obvious clue that Financial integration in East Asia is getting progress very fast on world financial markets. We estimates the degree of consumption risk sharing and analyzes the channels of consumption risk sharing among the East Asian countries using the method suggested by Asdrubali, Pierfederico, Sorensen, and Yosha(1996), Ravallion and Chaudhuri(1997). Estimation results show that the degrees of smoothing of idiosyncratic shock by cross-holding of financial assets are lower than the euro area economies. Capital markets play a minimal role, and credit markets provide a positive but limited role. These result suggest that there is some room for improvement in potential welfare gains in those economies by means of further risk sharing. On the basis of the international risk sharing model, this paper demonstrated that the high international reserve in East Asia was a second best international risk sharing mechanism in recent years, because the model of this paper proved that the international risk sharing mechanism was inherently inconsistent. Present net foreign assets scale in East Asia has exceeded reasonable scale.

Consumption Risk Sharing in ASEAN: A Comparison of the ASEAN+3, East Asia, the OECD, and the Eurozone

Joongsan Ko 서울대학교 경제연구소 2020 Seoul journal of economics Vol.33 No.1

This study analyzes the consumption risk sharing in the Association of Southeast Asian Nations (ASEAN) from a comparative perspective. Estimation results show that unlike ASEAN+3 and East Asia, the degree of consumption risk sharing increases in ASEAN after 1999. The increase is due to the rise in credit market smoothing among the ASEAN nonfounding members (Brunei, Cambodia, Laos, Myanmar, and Vietnam). Approximately twice as many shocks are shared in the Organization for Economic Cooperation and Development and the Eurozone than in ASEAN. The capital market smoothing increases after the adoption of the euro in 1999 in the Eurozone. From the empirical results, this study discusses the causes of increased risk sharing in ASEAN and the effects of the economic growth of ASEAN on the risk-sharing mechanism among the members.

A Review of International Risk Sharing for Policy Analysis

Pilar Poncela,Michela Nardo,Filippo M. Pericoli 대외경제정책연구원 2019 East Asian Economic Review Vol.23 No.3

issues from the perspective of the European Union. The traditional analyses contemplate three risk-sharing channels: the capital markets channel (through cross border portfolio investments), international transfers and the credit markets channel (via savings). Comparative analyses reveal that, on average, about 80% of the shock remains unsmoothed in Europe while only about 18% of the shock is transmitted to consumers within the US. From aggregated figures, there is space for improving, particularly, the cross-border investments channel in Europe. In this sense, the completion of the Banking and Capital Markets Union are expected to boost risk sharing across European member states. We also review new additional issues usually not contemplated by the traditional literature as depreciation, migration and the role of sovereigns and two new additional channels recently considered in the literature: government consumption and the real exchange rate. Finally, we also examine recent analysis related to the geographic distribution of risk sharing.

Exchange Rate Regimes and Economic Linkages

이종화,신관호 한국국제경제학회 2010 International Economic Journal Vol.24 No.1

We investigate how the exchange rate regime influences economic linkages between countries. We divide the exchange rate regime into three classifications: currency union, peg and floating exchange rates. Unlike most studies that solely focus on the relationship between anchor and client countries, we infer the exchange rate regime between any two countries based on their relationship to the common anchor currency. Then we empirically explore how the various exchange rate regimes impact on bilateral trade, output co-movement and risk sharing. The extent of risk sharing is measured by consumption co-movement relative to output co-movement. We find that while currency union has the greatest effect, the peg regime also significantly boosts trade. We also find that while the peg regime contributes to both output and consumption co-movements, currency union strengthens only consumption co-movement and possibly lowers output co-movement. We interpret these findings to indicate that currency union, the strictest form of pegged regimes, leads to higher industry specialization and better risk sharing opportunities than the less strict peg regime.