Research On International Consumption Risk Sharing Based On Valuation Effect

With the deepening of financial integration,the level of international consumption risk sharing has risen a lot.At the same time,the Net International Investment Position is expanding,the scale and fluctuation of valuation effect is increasing.On the other hand,in short term period such as the financial crisis in 2008,both the level of international consumption risk sharing and valuation effect of developed countries have been increased after the crisis,both these two items of non-developed countries decreased since the crisis.The evidence of co-movement of valuation effect and international consumption risk sharing proved that there is correlation between two.This paper based on the partial consumption risk sharing model provided by Bent E.Sorensen.et al.(2007),we investigate the impact of valuation effect on international consumption risk sharing of 72 countries during 1995 to 2016.The structure of this paper is introduced as follows:Chapter II reviews the traditional literatures about the valuation effect and international consumption risk sharing,Chapter III introduces the definition,theoretical model as well as the calculate measures of valuation effect and international consumption risk sharing,Chapter IV shows the co-movement of these two things and analysis the theoretical correlation between them,Chapter V based on above findings,empirically test the impact of valuation effect and analyze the result.At the end of this paper,this paper put forward some policy suggestions on the above empirical results.After empirical analysis,this paper concludes as follows:First,the international consumption risk sharing of the whole world has been improved a lot since the financial integration.Second,the degree of international consumption risk sharing of developed countries are higher than non-developed ones.Third,the valuation effect of developed countries are counter-cyclical,meanwhile,the less developed countries are pro-cyclical.Fourth,the expand of channel of valuation effect do improve the degree of international consumption risk sharing of each economy,especially for those counter-cyclical countries,which may shows that this countries benefit most in the process of international risk sharing.Last but not least,the consistency of shocks to countries may lower their risk sharing ability.This paper demonstrated the role of valuation effect from the perspective of international consumption risk sharing,which alleviates the tension in the international economy caused by the increase of interest rate in the United States.Based on above findings,we put forward the policy suggestions such as deepening the reform of financial integration,keep the steady growth of the scale of Net International Investment Position,optimizing the structure of foreign assets and liabilities as well as improve the infrastructure of domestic market.