No. 15/2002
FINANCIAL INTEGRATION AND CONSUMPTION COMOVEMENTS IN THE NORDIC COUNTRIES
Egil Matsen
Øystein Thøgersen
Abstract:
The cross-country correlations between annual per capita consumption growth
in the Nordic countries (Denmark, Finland, Norway and Sweden) during the
period 1973-1996 are much lower than predicted by the basic theory of
international financial integration. Capturing that the consumption behavior
of parts of the population may be myopic and that some external
consumption risks may be uninsured, this paper attempts to shed light
on this observation. We find some evidence of myopic consumption behavior
in Denmark, Finland and Sweden. Taking this into account, the financial
markets of the Nordic economies seem to be well integrated. It proves
hard to identify uninsured external consumption risks at the aggregate
level.
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