TY - BOOK ID - 133910321 TI - Macroeconomic volatility after trade and capital account liberalization PY - 2010 PB - Washington, D.C., The World Bank, DB - UniCat KW - Advanced economies KW - Bond KW - Capital account KW - Capital flows KW - Collateral KW - Debt Markets KW - Developing countries KW - Economic development KW - Economic Theory & Research KW - Emerging Markets KW - Emerging markets KW - Finance and Financial Sector Development KW - Financial flows KW - Financial integration KW - Financial markets KW - Free Trade KW - Globalization KW - International business KW - International Economics and Trade KW - International trade KW - Liberalization KW - Macroeconomics and Economic Growth KW - Output KW - Private Sector Development KW - Real estate KW - Risk sharing KW - Trade Policy KW - Volatility KW - World economy UR - https://www.unicat.be/uniCat?func=search&query=sysid:133910321 AB - What are the equilibrium effects of trade and capital liberalization on consumption smoothing? This question is addressed by studying the response to productivity shocks in a baseline two country, two goods, incomplete market model, where foreign borrowing is secured by collateral. The paper shows that international financial integration, modeled by relaxing a borrowing constraint a la Kiyotaki in the domestic country, worsens consumption smoothing; international trade integration, modeled by a reduction of non linear iceberg transportation costs, improves it. As a measure of consumption smoothing, the analysis uses the ratio between the simulated standard deviation of consumption growth and the simulated standard deviation of output growth. These results are qualitatively consistent with the empirical evidence provided by Kose, Prasad and Terrones (2003). ER -