Financial Super-Markets: Size Matters for Asset Trade

Philippe Martin and Helene Rey

No 8476, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is endogenous, and cross-border asset trade entails transaction costs. We show that demand effects have important implications for the link between market size, asset prices and financial market development. These effects are consistent with existing empirical evidence. Due to co-ordination failures, the extent of financial market incompleteness is inefficiently high. We also analyze the impact of domestic transaction costs and issuing costs on financial markets and returns.

JEL-codes: F12 F4 (search for similar items in EconPapers)
Date: 2001-09
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Published as Martin, Philippe and Helene Rey. "Financial Super-Markets: Size Matters For Asset Trade," Journal of International Economics, 2004, v64(2,Dec), 335-361.

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Related works:
Journal Article: Financial super-markets: size matters for asset trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2004)
Working Paper: Financial super-markets: size matters for asset trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2004)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2001)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial super-markets: size matters for asset trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (2000)
Working Paper: Financial Super-Markets: Size Matters for Asset Trade (1999)
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