The impact of financial market frictions on trade flows, capital flows and economic development

Arbeitspapier

We introduce financial frictions in a two sector model of international trade with heterogeneous agents. The level of specialization in the economy (economic development) depends on the quality of financial institutions. Underdeveloped financial markets prohibit an economy to specialize in sectors where finance is important. Capital flows and international trade are complements when countries differ in the degree of development of their financial sectors. Capital flows to countries with more robust financial institutions which in turn allow their economies to develop sectors that are financially dependent.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3321

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; International Financial Markets
• Subject: trade flows ; capital flows ; financial frictions ; economic development ; Finanzmarkt ; Markteffizienz ; Außenwirtschaft ; Kapitalmobilität ; Wirtschaftswachstum ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bougheas, Spiros ; Falvey, Rod
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/46345
• Last update: 10.03.2025, 11:41 AM CET