We develop a model of risk sharing in which agents can pool their consumption risks in both national and local markets and then smooth the remaining consumption fluctuations with credit markets. Estimating the model with a unique dataset on Chinese cities, we find that the participation rate in...

This paper examines the sustainability of the currency board arrangements in Argentina and Hong Kong. We employ a Markov switching model with two regimes to infer the exchange rate pressure due to economic fundamentals and market expectations. The empirical results suggest that economic...

This note examines the role of risk aversion in computing the welfare cost of consumption fluctuations under different utility and consumption process specifications. We find that the welfare cost of consumption fluctuations under a Constant-Relative-Risk-Aversion (CRRA) utility specification...

Summary This paper examines inter-provincial consumption risk sharing and intertemporal consumption smoothing across Chinese provinces before and after the 1979 economic reform. Our results indicate that the degree of consumption risk sharing among Chinese provinces is lower than that within the...

This paper examines the sustainability of the currency board arrangements in Argentina and Hong Kong. We employ a Markov switching model with two regimes to infer the exchange rate pressure due to economic fundamentals and market expectations. The empirical results suggest that economic...