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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/46345
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| Title: | | The impact of financial market frictions on trade flows, capital flows and economic development  |
| Authors: | | Bougheas, Spiros Falvey, Rod |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Trade Policy 3321 |
| Abstract: | | 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. |
| Subjects: | | trade flows capital flows financial frictions economic development |
| JEL: | | G21 G15 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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