European Parliament Library

Financial Globalization, Portfolio Diversification, and the Pattern of International Trade, Miklós Koren

Abstract
The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure rather than specializing according to their comparative advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in financially open countries is (i) higher, (ii) more dependent on productivity differences, and (iii) less sensitive to industry risks
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. RELATED LITERATURE""; ""III. THE MODEL""; ""A. Production""; ""B. Portfolio Choice""; ""C. Asset Markets""; ""IV. EMPIRICAL RESULTS""; ""A. Implications of the Model""; ""B. Data""; ""C. Results""; ""V. CONCLUSION""; ""APPENDIX I. PROOF OF THEOREM 1""; ""APPENDIX II. DATA APPENDIX""; ""REFERENCES""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (47 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781451920215

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