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Gains from Trade and the Sovereign Bond Market

Ken Kikkawa and Akira Sasahara

MPRA Paper from University Library of Munich, Germany

Abstract: Increasing international flows of goods, services, and financial assets have been shown to increase a country's welfare through various channels. This paper studies the interaction between a country's welfare gains from international trade and its sovereign’s access to bond markets. We do so by incorporating a sovereign bond market into a simple Armington (1969)'s trade model. While standard trade models suggest surprisingly small gains from trade, our model implies that introducing channels through a sovereign bond market greatly magnifies the gains from trade.

Keywords: Gains from trade; Sovereign debt; Sovereign default; Trade openness (search for similar items in EconPapers)
JEL-codes: F14 F15 F60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2018-12-20
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90685

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