Financial development, International Trade and welfare

Michel Blanchard () and Frederic Peltrault

MPRA Paper from University Library of Munich, Germany

Abstract: Differences between domestic financial systems can lead to international trade. A country with relatively developed or decentralized financial systems will export innovative commodities while a country with less developed and centralized financial systems will export traditional commodities. Trade is always welfare improving before the resolution of uncertainty but the country with the more risk averse financial system and the world as a whole can be worse off with trade after the resolution of uncertainty. A temporary protection can be welfare improving for such risk averse countries which are often the less developed ones.

Keywords: FINANCIAL DEVELOPMENT; TRADE; WELFARE; RISK AVERSION; TRADE LOSSES (search for similar items in EconPapers)
JEL-codes: D60 D81 F11 F13 G30 (search for similar items in EconPapers)
Date: 2009-06-10
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15650

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