This paper investigates whether risk sharing, measured as income and consumption smoothing, among countries in the EU and the European economic and monetary union (EMU) has increased since the adoption of the euro. We ask: Have the recent increase in foreign equity and debt holdings been...

Idiosyncratic labor incomes are typically modeled either by stochastic processes with heterogeneous income profiles (HIPs) or restricted income profiles (RIPs). The HIP assumes that individual labor income grows deterministically at an unobserved rate and contains a persistent but stationary...