01876cas a2200253 a 4500 AALejournalIMF005760 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451872859 1018-5941 BD-DhAAL BD-DhAAL Matsumoto, Akito. International Risk Sharing : Through Equity Diversification or Exchange Rate Hedging? / Akito Matsumoto, Charles Engel. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (46 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Well-known empirical puzzles in international macroeconomics concern the large divergence of equilibrium outcomes for consumption across countries from the predictions of models with full risk sharing. It is commonly believed that these risk-sharing puzzles are related to another empirical puzzle-the home-bias in equity puzzle. However, we show in a series of dynamic models that the full risk sharing equilibrium may not require much diversification of equity portfolios when there is price stickiness of the degree typically calibrated in macroeconomic models. This conclusion holds under a range of assumptions about home bias in preferences, price setting as PCP or LCP, and with or without nominal wage stickiness as long as there is some price rigidity. Mode of access: Internet Engel, Charles. IMF Working Papers; Working Paper ; No. 2009/138 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/138/001.2009.issue-138-en.xml IMF e-Library