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
Language
English
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