Financial Super-Markets: Size Matters for Asset Trade
Abstract
This paper presents a new theoretical framework to analyze=20 financial markets in an international context. We build a two-country=20 macroeconomic model in which agents are risk averse, assets are imperfect=20 substitutes, the number of financial assets is endogenous, and cross-border= =20 asset trade entails transaction costs. We show that demand effects have=20 important implications for the link between market size, asset prices and=20 financial market development. These effects are consistent with the=20 existing empirical evidence. Due to co-ordination failures, the extent of=20 financial market incompleteness is inefficiently high. We also analyze the= =20 impact of domestic transaction costs and issuing costs on financial markets= =20 and returns.Download Info
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Paper provided by EconWPA in its series International Finance with number 0012001.Length: 28 pages
Date of creation: 09 Feb 2001
Date of revision:
Handle: RePEc:wpa:wuwpif:0012001
Note: 28 pages, Acrobat .pdf
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Related research
Keywords:Other versions of this item:
- Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, vol. 64(2), pages 335-361, December.
- Martin, Philippe & Rey, Hélène, 1999. "Financial Super-Markets: Size Matters for Asset Trade," CEPR Discussion Papers 2232, C.E.P.R. Discussion Papers.
- Martin, Philippe & Rey, Hélène, 2000. "Financial Super-Markets: Size Matters for Asset Trade," Center for International and Development Economics Research, Working Paper Series qt0dr2z6p9, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Philippe Martin & Helene Rey, 2001. "Financial Super-Markets: Size Matters for Asset Trade," NBER Working Papers 8476, National Bureau of Economic Research, Inc.
- Philippe Martin and H�l�ne Rey., 2000. "Financial Super-Markets: Size Matters for Asset Trade," Center for International and Development Economics Research (CIDER) Working Papers C00-110, University of California at Berkeley.
- P Martin & H Rey, 2000. "Financial Super-Markets: Size Matters for Asset Trade," CEP Discussion Papers dp0450, Centre for Economic Performance, LSE.
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- G1 - Financial Economics - - General Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-02-27 (All new papers)
- NEP-FMK-2001-02-27 (Financial Markets)
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