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Trade in Financial Services: Procompetitive Effects and Growth Performance

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  • Francois, Joseph
  • Schuknecht, Ludger

Abstract

In this paper we explore linkages between financial services trade and growth. We offer a formalization of the argument that trade, through the fostering of financial market integration, may yield important long-run effects related to increased competition. The relationships formalized here link long-run economic performance to scale economies and cost structures in the financial services sector, and to market concentration in the sector. We first develop an analytical model. This motivates an econometric exercise. Cross-country growth regressions point to a strong positive relationship between financial sector competition and financial sector openness, and between growth and financial sector competition.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2144.

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Date of creation: May 1999
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Handle: RePEc:cpr:ceprdp:2144

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Related research

Keywords: Financial Services Trade; Service Trade and Imperfect Competition; Trade in Services and Growth;

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References

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  1. Williamson, Stephen D, 1987. "Costly Monitoring, Loan Contracts, and Equilibrium Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 135-45, February.
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  3. Hoekman, B.M., 1992. "Conceptual and Political Economy Issues in Liberalizing International Transactions in Services," Working Papers 309, Research Seminar in International Economics, University of Michigan.
  4. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
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  7. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
  8. Joseph F. Francois, 1990. "Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 109-24, February.
  9. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-87, May.
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  11. Berthelemy, J C & Varoudakis, A, 1995. "Thresholds in Financial Development and Economic Growth," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(0), pages 70-84, Suppl..
  12. James R. Markusen, 1988. "Production, Trade, and Migration with Differentiated, Skilled Workers," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 492-506, August.
  13. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  14. Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, vol. 41(1), pages 139-146, January.
  15. A. Galetovic, 1996. "Finance and growth: a synthesis and interpretation of the evidence," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 59-82.
  16. A. Galetovic, 1996. "Finance and growth: a synthesis and interpretation of the evidence," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 59-82.
  17. Williamson, Stephen D, 1987. "Financial Intermediation, Business Failures, and Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1196-1216, December.
  18. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
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Citations

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Cited by:
  1. Francois, Joseph & Wooton, Ian, 2001. "Market Structure, Trade Liberalization, and the GATS," CEPR Discussion Papers 2669, C.E.P.R. Discussion Papers.
  2. Gary Clyde Hufbauer & Erika Wada, 1999. "Hazards and Precautions: Tales of International Finance," Working Paper Series WP99-11, Peterson Institute for International Economics.
  3. Hui Huang & John Whalley & Shunming Zhang, 2009. "Exploring policy options in joint intertemporal-spatial trade models using an incomplete markets approach," Economic Theory, Springer, vol. 41(1), pages 131-145, October.
  4. Nacer Bernou & Mustapha Sadni Jallab, 2002. "Le commerce des services financiers dans le monde : un ├ętat des lieux," Post-Print halshs-00178172, HAL.
  5. Philipp Harms & Aaditya Mattoo & Ludger Schuknecht, 2003. "Explaining liberalization commitments in financial services trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(1), pages 82-113, March.
  6. Mattoo, Aaditya & Rathindran, Randeep & Subramanian, Arvind, 2001. "Measuring services trade liberalization and its impact on economic growth : an illustration," Policy Research Working Paper Series 2655, The World Bank.
  7. Lee-Rong Wang & Chung-Hua Shen & Ching-Yang Liang, 2008. "Financial Liberalization under the WTO and Its Relationship with the Macro Economy," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 315-345 National Bureau of Economic Research, Inc.
  8. Hui Huang & John Whalley & Shunming Zhang, 2005. "Trade Liberalization in a Joint Spatial Inter-Temporal Trade Model," CESifo Working Paper Series 1463, CESifo Group Munich.

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