Consumption risk-sharing within Australia and with New Zealand

David Kim, Jeffrey Sheen*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)


We quantify how output risks are smoothed within Australia, and between Australia and New Zealand. About 90 per cent of shocks were smoothed within Australia through credit and capital markets, with fiscal policy a source of dis-smoothing after 1992. Risk-sharing between Australia and New Zealand was greater than within Europe, occurring mostly through credit markets. Fully integrated financial markets between Australia and New Zealand before 1983 would have yielded a welfare gain of 8.9 per cent of certainty-equivalent consumption for New Zealand, but a loss of 1.7 per cent for Australia. These gains (losses) were largely resolved by the deregulations and trade agreement of the early 1980s.

Original languageEnglish
Pages (from-to)46-59
Number of pages14
JournalEconomic Record
Issue number260
Publication statusPublished - Mar 2007
Externally publishedYes

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