Liberalization of Trade in Financial Services and Financial Sector Stability (Empirical Approach)
IMF Working Papers, August 1, 2002
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- Liberalization of Trade in Financial Services and Financial Sector Stability (Empirical Approach)
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Bibliographic details
- Authors: Alexei P Kireyev
- Published: August 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856057.001
Summary
- The paper explores empirically the links between the WTO-driven liberalization of trade in financial services and the stability of national financial systems.
- Econometric testing uses indicators intended to proxy financial sector stability, subdivided into exchange rate and banking sector stability.
- Main high-level conclusion: opening of the financial sector is an efficient policy instrument at the disposal of the authorities for achieving a variety of macroeconomic goals.
- While liberalization is found to be broadly conducive to stability, the outcome of liberalization on exchange rate stability is less predictable than on banking sector stability.
Empirical findings
- Liberalization of trade in financial services is broadly conducive to financial sector stability.
- The effect of liberalization on:
- Banking sector stability: more predictable and broadly positive.
- Exchange rate stability: less predictable compared with banking sector outcomes.
- Econometric approach: indicators proxied financial sector stability and were subdivided into exchange rate stability and banking sector stability for testing.
Policy implications and interpretation
- Opening the financial sector can be used as an efficient policy instrument to achieve various macroeconomic goals.
- Policymakers should expect more consistent stabilizing benefits in the banking sector than in exchange rate performance when pursuing liberalization of financial services.
- Implicit caution: exchange rate outcomes following liberalization are less certain and may require complementary policies or sequencing.
Subject classification and keywords
- Subjects: Economic sectors, Exchange rate stability, Financial sector, Financial sector policy and analysis, Financial sector stability, Financial services, Foreign exchange, International trade, Trade in services
- Keywords: a number of country report, exchange rate, Exchange rate stability, Financial sector, financial sector stability, financial service, financial services, financial services liberalization, liberalization, liberalization commitment, liberalization dummy, liberalization indices, liberalization measure, liberalization of trade, sequenced liberalization, Trade in services, trade liberalization, transmission variable, WP, WTO framework
Author and editorial note
- Disclaimer included in the source: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."
Source: IMF Working Paper — "Liberalization of Trade in Financial Services and Financial Sector Stability (Empirical Approach)" by Alexei P Kireyev (Working Paper No. 2002/139).