Title

Incomplete financial market and the sequence of international trade liberalization

Document Type

Conference paper

Source Publication

International Journal of Finance and Economics

Publication Date

1-1-2008

Volume

13

Issue

1

First Page

108

Last Page

117

Keywords

Incomplete market, Sequence, Trade liberalization, Welfare

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.

DOI

10.1002/ijfe.352

Print ISSN

10769307

Funding Information

Funded by: RGC of Hong Kong SAR Government. Grant Number: LU3409/06H; Lingnan University, Hong Kong. Grant Number: DR06A3. {LU3409/06H, DR06A3}

Publisher Statement

Copyright © 2007 John Wiley & Sons, Ltd. Access to external full text or publisher's version may require subscription.

Additional Information

Paper presented at the Conference on "International Financial Markets and the Macroeconomy", 13-14 July 2006, Hong Kong.

Full-text Version

Publisher’s Version

Recommended Citation

Ma, Y. (2008). Incomplete financial market and the sequence of international trade liberalization. International Journal of Finance and Economics, 13(1), 108-117. doi: 10.1002/ijfe.352

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