Discussion Paper Details

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Title: Trade in Financial Services: Procompetitive Effects and Growth Performance

Author(s): Joseph Francois and Ludger Schuknecht

Publication Date: May 1999

Keyword(s): Financial Services Trade, Service Trade and Imperfect Competition and Trade in Services and Growth

Programme Area(s): International Trade and Regional Economics

Abstract: In this paper we explore linkages between financial services trade and growth. We offer a formalization of the argument that trade, through the fostering of financial market integration, may yield important long-run effects related to increased competition. The relationships formalized here link long-run economic performance to scale economies and cost structures in the financial services sector, and to market concentration in the sector. We first develop an analytical model. This motivates an econometric exercise. Cross-country growth regressions point to a strong positive relationship between financial sector competition and financial sector openness, and between growth and financial sector competition.

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Bibliographic Reference

Francois, J and Schuknecht, L. 1999. 'Trade in Financial Services: Procompetitive Effects and Growth Performance'. London, Centre for Economic Policy Research.