Consumption Risk Sharing in ASEAN: A Comparison of the ASEAN+3, East Asia, the OECD, and the Eurozone

Abstract

This study analyzes the consumption risk sharing in the Association of Southeast Asian Nations (ASEAN) from a comparative perspective. Estimation results show that unlike ASEAN+3 and East Asia, the degree of consumption risk sharing increases in ASEAN after 1999. The increase is due to the rise in credit market smoothing among the ASEAN nonfounding members (Brunei, Cambodia, Laos, Myanmar, and Vietnam). Approximately twice as many shocks are shared in the Organization for Economic Cooperation and Development and the Eurozone than in ASEAN. The capital market smoothing increases after the adoption of the euro in 1999 in the Eurozone. From the empirical results, this study discusses the causes of increased risk sharing in ASEAN and the effects of the economic growth of ASEAN on the risk-sharing mechanism among the members.