Endogenous trade policy and the gains from international financial markets

• 成果类型: Article
• 署名作者: Devereux, MB; Lee, KM
• 署名单位: University of British Columbia; National University of Singapore
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(98)00048-8
• 发表日期: 1999
• 页码: 35-59
• 关键词: financial integration; Trade policy; welfare gains

摘要

This paper examines the interaction between international financial markets and trade policy. When trade policy is endogenous, there is a secondary gain from opening up financial markets, in addition to the direct risk-sharing benefits. By breaking the direct link between the terms of trade and welfare, international portfolio diversification can allow for a lower level of trade protection in a tariff game between governments, We apply the model to an estimation of the welfare gains from international financial markets. Our results show that these indirect 'trade' gains from financial markets are likely to be much larger than the direct 'risk-sharing' gains. In the tariff game with financial markets however, there are multiple equilibria. While one equilibrium allows for complete diversification and complete free trade, there are other equilibria in which there is limited diversification and a high level of average protection. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classification: F13; F3; F36.