The International Diversification Puzzle Is Not as Bad as You Think

• 成果类型: Article
• 署名作者: Heathcote, Jonathan; Perri, Fabrizio
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/674143
• 发表日期: 2013
• 页码: 1108-1159
• 关键词: prices; TRADE; transmission; rates; GOODS

摘要

The international diversification puzzle is the fact that country portfolios are on average biased toward domestic assets, while one-good international macro models with nondiversifiable labor income risk predict the opposite pattern of diversification. This paper embeds a portfolio choice decision in a two-good international business cycle model and provides a closed-form solution for equilibrium country portfolios. Equilibrium portfolios are biased toward domestic assets because endogenous international relative price fluctuations make domestic assets a good hedge against labor income risk. Evidence from developed economies in recent years is qualitatively and quantitatively consistent with the mechanisms highlighted by the theory.