International equity and bond positions in a DSGE model with variety risk in consumption

• 成果类型: Article
• 署名作者: Hamano, Masashige
• 署名单位: Sophia University; University of Luxembourg
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2014.12.002
• 发表日期: 2015
• 页码: 212-226
• 关键词: Real exchange rate; Home biased equity puzzle; Firm entry; firm heterogeneity

摘要

This paper analyzes equity and bond positions in a two-country Dynamic Stochastic General Equilibrium model where the number of varieties, i.e., the extensive margins of products available to consumers, is endogenously determined. Fluctuations in the welfare-based real exchange rate, including those in the number of varieties, matter to international consumption risk sharing. We investigate the implication of such variety risk for the optimal portfolio choice and show that the variety risk generates home-biased equity positions, strengthening those obtained with the standard model in the literature. We also find preliminary empirical support for the mechanism. (C) 2014 Elsevier B.V. All rights reserved.