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Trade in Financial Services: Procompetitive Effects and Growth Performance

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  • Francois, Joseph
  • Schuknecht, Ludger

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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  • Francois, Joseph & Schuknecht, Ludger, 1999. "Trade in Financial Services: Procompetitive Effects and Growth Performance," CEPR Discussion Papers 2144, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2144
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    2. John Whalley, 2004. "Assessing the Benefits to Developing Countries of Liberalisation in Services Trade," The World Economy, Wiley Blackwell, vol. 27(8), pages 1223-1253, August.
    3. Francois, Joseph & Wooton, Ian, 2001. "Market structure, trade liberalization and the GATS," European Journal of Political Economy, Elsevier, vol. 17(2), pages 389-402, June.
    4. Karam, Fida & Zaki, Chahir, 2015. "Trade volume and economic growth in the MENA region: Goods or services?," Economic Modelling, Elsevier, vol. 45(C), pages 22-37.
    5. Jacob Kolster, 2015. "North Africa - Working paper - Trade Volume and Economic Growth in the MENA Region: Goods or Services?," Working Paper Series 2157, African Development Bank.
    6. Lee-Rong Wang & Chung-Hua Shen & Ching-Yang Liang, 2008. "Financial Liberalization under the WTO and Its Relationship with the Macro Economy," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy, pages 315-345, National Bureau of Economic Research, Inc.
    7. Ivana Prica, 2008. "Financial Servicies Liberalization And International Integration In South Eastern Europe," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 53(178-179), pages 122-144, July - De.
    8. Philipp Harms & Aaditya Mattoo & Ludger Schuknecht, 2003. "Explaining liberalization commitments in financial services trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 82-113, March.
    9. Mattoo, Aaditya & Rathindran, Randeep, 2006. "Measuring Services Trade Liberalization and Its Impact on Economic Growth: An Illustration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 64-98.
    10. Françoise Okah Efogo, 2020. "Does trade in services improve African participation in global value chains?," African Development Review, African Development Bank, vol. 32(4), pages 758-772, December.
    11. Hui Huang & John Whalley & Shunming Zhang, 2005. "Trade Liberalization in a Joint Spatial Inter-Temporal Trade Model," CESifo Working Paper Series 1463, CESifo.
    12. Nacer Bernou & Mustapha Sadni Jallab, 2002. "Le commerce des services financiers dans le monde : un état des lieux," Post-Print halshs-00178172, HAL.
    13. Hui Huang & John Whalley & Shunming Zhang, 2009. "Exploring policy options in joint intertemporal-spatial trade models using an incomplete markets approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 131-145, October.
    14. Andrés Maroto-Sánchez, 2010. "Productivity in the services sector: conventional and current explanations," The Service Industries Journal, Taylor & Francis Journals, vol. 32(5), pages 719-746, October.
    15. Gary Clyde Hufbauer & Erika Wada, 1999. "Hazards and Precautions: Tales of International Finance," Working Paper Series WP99-11, Peterson Institute for International Economics.
    16. Nevine Eid, 2006. "FDI-Growth Relationship: Is Financial Deepening a Pre-condition," EcoMod2006 272100023, EcoMod.
    17. Sinan Esen & Korhan Gokmenoglu, 2016. "Financial Centres Index and GDP Growth," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 198-206, April.
    18. Andrés Maroto-Sanchez, 2010. "Growth and productivity in the service sector: The state of the art," Working Papers 07/10, Instituto Universitario de Análisis Económico y Social.
    19. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economics Research Papers 2012-049, Friedrich-Schiller-University Jena.
    20. Rashmi Banga, 2005. "Role of Services in the Growth Process: A Survey," Indian Council for Research on International Economic Relations, New Delhi Working Papers 159, Indian Council for Research on International Economic Relations, New Delhi, India.

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    More about this item

    Keywords

    Financial Services Trade; Service Trade and Imperfect Competition; Trade in Services and Growth;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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