{
  "title": "Geoeconomic Fragmentation and International Diversification Benefits",
  "publication": "IMF Working Papers, March 8, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768",
  "overlayPath": "/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/index.md",
  "summary": "This paper applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010) to quantify the loss of international diversification benefits for major advanced economies, which have a significant presence in international financial markets, under geoeconomic fragm",
  "sections": [
    {
      "heading": "Summary and Objective",
      "content": "- Applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010).\n- Objective: quantify the loss of international diversification benefits for major advanced economies under geoeconomic fragmentation.\n- Fragmentation defined operationally by inability to trade with geopolitically distant countries, measured by voting disagreement on foreign policy issues at the United Nations General Assembly meetings during 2012-2021."
    },
    {
      "heading": "Methodology and Scenarios",
      "content": "- Model: two-country open-economy model with trade in stocks and bonds (Coeurdacier et al., 2010).\n- Counterfactual simulations under different hypothetical fragmentation scenarios.\n- Fragmentation metric: voting disagreement at UN General Assembly meetings, 2012-2021.\n- Focus: major advanced economies with a significant presence in international financial markets."
    },
    {
      "heading": "Key Findings",
      "content": "- Simulation results imply a potentially significant loss of international diversification benefits of financial openness for the considered advanced economies.\n- Losses arise when trading is limited to partner countries that are geopolitical allies with highly synchronized business cycles."
    },
    {
      "heading": "Thematic Tags and Subjects (as provided)",
      "content": "- Business cycles\n- Consumption\n- Economic growth\n- Financial markets\n- International capital markets\n- National accounts\n- Output gap\n- Production\n- Total factor productivity"
    },
    {
      "heading": "Keywords (as provided)",
      "content": "- Business cycles\n- Consumption\n- diversification benefit\n- financial integration\n- Geopolitical risk\n- Global\n- International capital markets\n- international risk sharing\n- investment efficiency process\n- Output gap\n- output volatility\n- simulation result\n- Total factor productivity\n- volatility of Macro-Financial Variables\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/bundle-manifest.json)",
    "Authors: Tatsushi Okuda, Tomohiro Tsuruga",
    "Published: March 8, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400269530.001",
    "Applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010).",
    "Objective: quantify the loss of international diversification benefits for major advanced economies under geoeconomic fragmentation.",
    "Fragmentation defined operationally by inability to trade with geopolitically distant countries, measured by voting disagreement on foreign policy issues at the United Nations General Assembly meetings during 2012-2021.",
    "Model: two-country open-economy model with trade in stocks and bonds (Coeurdacier et al., 2010).",
    "Counterfactual simulations under different hypothetical fragmentation scenarios.",
    "Fragmentation metric: voting disagreement at UN General Assembly meetings, 2012-2021.",
    "Focus: major advanced economies with a significant presence in international financial markets.",
    "Simulation results imply a potentially significant loss of international diversification benefits of financial openness for the considered advanced economies.",
    "Losses arise when trading is limited to partner countries that are geopolitical allies with highly synchronized business cycles.",
    "Business cycles",
    "Consumption",
    "Economic growth",
    "Financial markets",
    "International capital markets",
    "National accounts",
    "Output gap",
    "Production",
    "Total factor productivity",
    "Business cycles",
    "Consumption",
    "diversification benefit",
    "financial integration",
    "Geopolitical risk",
    "Global",
    "International capital markets",
    "international risk sharing",
    "investment efficiency process",
    "Output gap",
    "output volatility",
    "simulation result",
    "Total factor productivity",
    "volatility of Macro-Financial Variables",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024048-print-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2024/english/wpiea2024048-print-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2024/english/wpiea2024048-print-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/index.md",
    "json": "/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/index.json",
    "bundleManifest": "/en/publications/wp/issues/2024/03/08/geoeconomic-fragmentation-and-international-diversification-benefits-545768/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-16T23:46:31.069Z"
}