Economic Policy Review
Macro Markets and Financial Security
April 1999 Volume 5, Number 1
JEL classification: F36, G15, G23

Authors: Stefano Athanasoulis, Robert Shiller, and Eric van Wincoop

Uncertainty about national income growth poses significant macroeconomic risk to households all over the world. To help reduce investors' exposure, researchers have proposed a controversial new set of security markets called macro markets. These international markets would trade long-term claims on the income of an entire country or region. For example, in a macro market for the United States, an investor could buy a claim on the U.S. national income and then receive dividends equal to a fraction of national income for as long as the claim is held. Although many barriers stand in the way of the markets' development—including investors' focus on short-term portfolio performance, sizable startup costs, and contract enforcement difficulties—the potential benefits of these markets are great.

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