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Credit Market Quality, Innovation and Trade

Author

Listed:
  • Terra Cristina

    (Universite de Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise.)

  • Vasconcelos Enrico

    (Graduate School of Economics, Fundação Getulio Vargas, and Secretaria de Política Econômica, Ministério da Fazenda)

Abstract

Using a general equilibrium model with private R&D financing, this article investigates the impact of trade openness to trade on growth and on welfare for two countries equal in all aspects, except for the quality of credit markets. We show that opening to trade increases growth in the country with better credit markets (North) and decreases it in the other country (South). With respect to trade pattern, South imports high tech goods and exports traditional goods. In terms of welfare, opening to trade may lower the welfare of individuals in the short run, but in the long run all of them are better o¤ under free trade than if they were under autarky.

Suggested Citation

  • Terra Cristina & Vasconcelos Enrico, 2010. "Credit Market Quality, Innovation and Trade," THEMA Working Papers 2010-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2010-08
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    More about this item

    Keywords

    credit markets; growth; trade pattern;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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