Lewis, Karen K2023-05-222023-05-2219962016-05-25https://repository.upenn.edu/handle/20.500.14332/34520Recent research in international business cycles finds that international consumption comovements do not match the risk-sharing predictions of standard complete markets models. In this paper, I ask whether two different types of explanations can help explain this result: (1) nonseparabilities between tradables and nontradable leisure or goods and (2) the effects of capital market restrictions on consumption risk sharing. I find that risk sharing cannot be resolved by either explanation alone. However, when I allow for both nonseparabilities and certain market restrictions, risk sharing among unrestricted countries cannot be rejected. This evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries.© 1996 by The University of Chicago.Finance and Financial ManagementArticle