Incomplete financial market and the sequence of international trade liberalization

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)108-117
Journal / PublicationInternational Journal of Finance and Economics
Volume13
Issue number1
Publication statusPublished - Jan 2008
Externally publishedYes

Abstract

In this paper, an incomplete financial market model was built to illustrate the impacts of the market incompleteness on the benefits of trade liberalization. Particularly, it will focus on the investigation of the impacts of different sequences of opening up the goods market. That is, should the government open up international trade simultaneously with the opening up of the domestic trade, i.e. implementing a 'shock therapy' approach? Or should the government liberalize the domestic goods market first, and then deregulate the international trade, i.e. following a 'gradualism' approach? This paper proves that the gradualism approach by opening up the domestic goods market before liberalization of the international trade can guarantee the successive improvement of everyone's welfare. Therefore, the gradualism approach is a Pareto-improvement sequence. Copyright © 2007 John Wiley & Sons, Ltd.

Research Area(s)

  • Incomplete market, Sequence, Trade liberalization, Welfare