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Does Financial Development Lead to Trade Liberalization?

  • Svaleryd, Helena

    (Dept. of Economics, Stockholm University)

  • Vlachos, Jonas


    (Department of Economics, Stockholm School of Economics)

It has long been argued that trade restrictions can be motivated by insurance considerations in the absence of full risk diversification. Recent theoretical research suggests that markets for risk can alleviate resistance to reform and protectionist lobby group pressure. We empirically address the hypothesis that institutions reducing risk can facilitate liberal trade policy. Our results reveal a robust positive relationship between openness to trade and the development of domestic and international financial markets.

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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2000:11.

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Length: 35 pages
Date of creation: 10 Sep 2000
Date of revision:
Handle: RePEc:hhs:sunrpe:2000_0011
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Fax: +46 8 16 14 25
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