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The macroeconomic effects of world trade in financial assets

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  • Harold L. Cole

Abstract

This article analyzes some of the potential effects of increased international financial integration within a simple two-country model. In the model, the article considers a switch in the menu of internationally traded financial securities from bonds to complete contingent claims and examines the impact of this switch on the stochastic properties, including the cross-country correlations, of standard macroeconomic aggregates like output, consumption, and labor effort, as well as the trade balance.

Suggested Citation

  • Harold L. Cole, 1993. "The macroeconomic effects of world trade in financial assets," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 12-21.
  • Handle: RePEc:fip:fedmqr:y:1993:i:sum:p:12-21:n:v.17no.3
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    References listed on IDEAS

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    1. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    2. Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030.
    3. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
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    Citations

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    Cited by:

    1. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
    2. Michael A. Kouparitsas, 1996. "North-South financial integration and business cycles," Working Paper Series, Macroeconomic Issues WP-96-10, Federal Reserve Bank of Chicago.
    3. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, pages 335-361.
    4. Ayhan Kose, M. & Otrok, Christopher & Whiteman, Charles H., 2008. "Understanding the evolution of world business cycles," Journal of International Economics, Elsevier, pages 110-130.
    5. Alejandro Cunat & Marco Maffezzoli, 2004. "Hecksher-Ohlin Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 555-585, July.
    6. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, pages 335-361.
    7. Tesar, Linda L., 1995. "Evaluating the gains from international risksharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 95-143.
    8. Victoria Nuguer, 2016. "Financial Intermediation in a Global Environment," International Journal of Central Banking, International Journal of Central Banking, vol. 12(3), pages 291-344, September.
    9. George Furstenberg, 1998. "From Worldwide Capital Mobility to International Financial Integration: A Review Essay," Open Economies Review, Springer, pages 53-84.
    10. Nuguer Victoria & Cuadra Gabriel, 2016. "Risky Banks and Macroprudential Policy for Emerging Economies," Working Papers 2016-06, Banco de México.

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    Keywords

    International finance;

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