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Political Economy Aspects of Trade and Financial Liberalization: Implications for Sequencing

Author

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  • Ms. Rina Bhattacharya

Abstract

This paper integrates a two-period overlapping generations model with a standard two-sector Hecksher-Ohlin trade model and analyzes the impact of uncertainty on domestic investment in the exportable and importable sectors, the political economy linkages between trade and financial liberalization, and the implications for sequencing. Under certain assumptions financial liberalization leads to a movement of resources in the opposite direction to that implied by trade liberalization, thus defeating one of the objectives of tariff reform. When political economy linkages are taken into account, however, the indirect effects of financial liberalization may offset the direct effects and encourage a movement of resources in the desired direction.

Suggested Citation

  • Ms. Rina Bhattacharya, 1999. "Political Economy Aspects of Trade and Financial Liberalization: Implications for Sequencing," IMF Working Papers 1999/159, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/159
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    Cited by:

    1. Tolga Aksoy, 2013. "Economic Reforms and Growth in Developing Countries," EcoMod2013 5318, EcoMod.
    2. Tolga Aksoy, 2019. "Structural reforms and growth in developing countries," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 22(4), pages 325-350, October.
    3. Mr. S. Nuri Erbas, 2002. "Primeron Reforms in a Second-Best Ambiguous Environment: A Case for Gradualism," IMF Working Papers 2002/050, International Monetary Fund.

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