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Credit Market Quality, Innovation and Trade

Cristina Terra () and Enrico Vasconcelos

No 458, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: Using a general equilibrium model with private R&D financing, we investigate the impact of trade openness on innovation, trade pattern and welfare for two countries equal in all aspects, except for the quality of credit markets. We show that trade openness increases innovation only in the country with better credit market, while it has a negative impact on innovation when credit markets are less developed. With respect to trade pattern, the country with worse credit market 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

New Economics Papers: this item is included in nep-fdg, nep-ino and nep-int
Date: 2017-07
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Working Paper: Credit Market Quality, Innovation and Trade (2010) Downloads
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