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Consumption volatility and financial openness

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Economic theory predicts that the integration of financial markets lowers the volatility of consumption. In this article, we study long-term trends in the consumption volatility of the G7 countries. Using different measures of financial openness, we find evidence that greater financial openness has been associated with lower consumption volatility. However, volatility of consumption relative to output has not declined.

Document Type: Research Article


Affiliations: 1: Department of Economics, University of Tubingen, Tubingen, Germany 2: Department of Statistics, University of Munich, Munich, Germany

Publication date: 2010-11-01

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