Political Economy Aspects of Trade and Financial Liberalization: Implications for Sequencing
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Summary:
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.
Series:
Working Paper No. 1999/159
Subject:
Deposit rates Domestic savings External debt Financial services International trade National accounts Tariffs Taxes Trade liberalization
English
Publication Date:
November 1, 1999
ISBN/ISSN:
9781451857658/1018-5941
Stock No:
WPIEA1591999
Pages:
24
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