A surge in cross-border capital flow and stock of foreign assets and liabilities in recent years signals greater international …financial integration. Greater …financial integration should improve consumption suggests that risk sharing across countries since countries can trade more …nancial assets to smooth their consumptions. However, most empirical evidence risk sharing has improved only in industrialized economies but not in emerging markets and developing countries. Using a new measure of risk sharing, this book found an indirect impact of financial integration on risk sharing in emerging markets and developing countries that previous studies have failed to quantify. Moreover, financial integration is found to exhibit decreasing returns to scale.