Trade and Financial Sector Reforms : Interactions and Spillovers
The allocation of production across firms is a potentially important explanation of the productivity gap between rich and poor economies. Reforms to trade policy and the domestic financial sector are often both key elements of policy packages aimed...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100423141314 http://hdl.handle.net/10986/3766 |
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okr-10986-3766 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
ACCESS TO FINANCE ADVANCED ECONOMIES AGENCY PROBLEMS AGGREGATE DEMAND AGRICULTURE ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BALANCE OF PAYMENTS BANKING LAWS BANKING SECTOR BANKS BENEFICIAL EFFECTS BILATERAL TRADE BORROWING BORROWING CAPACITY BORROWING COSTS BORROWINGS CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CENTRALLY PLANNED ECONOMY COLLATERAL COMPARATIVE ADVANTAGE CONSUMPTION EXPENDITURE CONSUMPTION LEVELS CONTRACT ENFORCEMENT CORRUPTION COST OF ENTRY COST OF FINANCE COST STRUCTURE CREDIT ALLOCATION CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKET CREDIT MARKETS CREDITOR CREDITORS CRISES CURRENT ACCOUNT DEBT DEBT CONTRACTS DEBT REPAYMENTS DERIVATIVE DEVELOPING ECONOMIES DIRECTED CREDIT DISCOUNT RATE DOMESTIC BORROWING DOMESTIC CREDIT DOMESTIC ECONOMY DOMESTIC INTEREST RATE DOMESTIC MARKET DOMESTIC MARKETS DOMESTIC PRICE DOMESTIC PRICES DUMPING ELASTICITY ELASTICITY OF SUBSTITUTION EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ENDOWMENTS ENTREPRENEUR ENTREPRENEURS EQUATIONS EQUILIBRIUM EQUILIBRIUM VALUE EQUILIBRIUM VALUES EQUILIBRIUM WAGES EQUITY INVESTMENT EXCHANGE RATE EXCHANGE RATES EXPECTED UTILITY EXPENDITURE EXPORT MARKET EXPORT MARKETS EXPORTER EXPORTERS EXPORTS EXPROPRIATION EXTERNAL FUNDS FINANCIAL CONSTRAINTS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL LIBERALIZATION FINANCIAL REFORM FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR LIBERALIZATION FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORMS FINANCIAL SECTORS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FLOW OF FUNDS FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN FIRMS FOREIGN LENDERS FORM OF COLLATERAL GDP GENERAL EQUILIBRIUM GLOBAL FINANCIAL SYSTEM GROSS DEBT HIDDEN INFORMATION HOLDING HOME COUNTRY HOME CREDIT HOST ECONOMIES HOUSEHOLD SAVING HOUSEHOLD SAVINGS HOUSEHOLDS HUMAN CAPITAL INCOME INCOME EFFECT INDUSTRIAL ECONOMIES INEFFICIENCY INTEREST RATE INTEREST RATE CEILINGS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL TRADE INVESTMENT CHOICE INVESTMENT CHOICES INVESTMENT DECISIONS INVESTMENT OPTIONS INVESTMENT PATTERNS INVESTMENT PROJECTS INVESTOR PROTECTION LABOR COSTS LABOR DEMAND LABOR MARKET LABOR MARKETS LABOR PRODUCTIVITY LABOR SUPPLY LACK OF INFORMATION LEGAL SYSTEMS LENDERS LIBERALIZATION OF INTEREST LIQUIDITY MACROECONOMIC EFFECTS MARGINAL BENEFITS MARGINAL COST MARGINAL PRODUCTS MARKET EQUILIBRIUM MONOPOLISTIC COMPETITION MORAL HAZARD MOTIVATION MULTIPLIERS NET EXPORTS NET WORTH OPTIMAL INVESTMENT OUTPUTS PERFECT COMPETITION POLICY RESPONSE POLITICAL ECONOMY POSITIVE EFFECTS PREFERENTIAL ACCESS PRICE CHANGES PRIVATE BANKS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PRUDENTIAL SUPERVISION RATE OF RETURN REAL EXCHANGE RATE REAL INTEREST REAL INTEREST RATE REAL WAGES REPAYMENT RESOURCE ALLOCATION RETURNS SAVINGS SECURITIES SECURITIES MARKETS SELF-FINANCE SOLVENCY TANGIBLE ASSETS TARIFF BARRIERS TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS TRADING TRANSACTION TRANSACTION COSTS TRANSFER OF OWNERSHIP TRANSITION ECONOMIES UNION VALUE ADDED VALUE OF OUTPUT VARIABLE COST WAGES WEALTH WORLD ECONOMY WTO |
| spellingShingle |
ACCESS TO FINANCE ADVANCED ECONOMIES AGENCY PROBLEMS AGGREGATE DEMAND AGRICULTURE ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BALANCE OF PAYMENTS BANKING LAWS BANKING SECTOR BANKS BENEFICIAL EFFECTS BILATERAL TRADE BORROWING BORROWING CAPACITY BORROWING COSTS BORROWINGS CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CENTRALLY PLANNED ECONOMY COLLATERAL COMPARATIVE ADVANTAGE CONSUMPTION EXPENDITURE CONSUMPTION LEVELS CONTRACT ENFORCEMENT CORRUPTION COST OF ENTRY COST OF FINANCE COST STRUCTURE CREDIT ALLOCATION CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKET CREDIT MARKETS CREDITOR CREDITORS CRISES CURRENT ACCOUNT DEBT DEBT CONTRACTS DEBT REPAYMENTS DERIVATIVE DEVELOPING ECONOMIES DIRECTED CREDIT DISCOUNT RATE DOMESTIC BORROWING DOMESTIC CREDIT DOMESTIC ECONOMY DOMESTIC INTEREST RATE DOMESTIC MARKET DOMESTIC MARKETS DOMESTIC PRICE DOMESTIC PRICES DUMPING ELASTICITY ELASTICITY OF SUBSTITUTION EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ENDOWMENTS ENTREPRENEUR ENTREPRENEURS EQUATIONS EQUILIBRIUM EQUILIBRIUM VALUE EQUILIBRIUM VALUES EQUILIBRIUM WAGES EQUITY INVESTMENT EXCHANGE RATE EXCHANGE RATES EXPECTED UTILITY EXPENDITURE EXPORT MARKET EXPORT MARKETS EXPORTER EXPORTERS EXPORTS EXPROPRIATION EXTERNAL FUNDS FINANCIAL CONSTRAINTS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL LIBERALIZATION FINANCIAL REFORM FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR LIBERALIZATION FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORMS FINANCIAL SECTORS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FLOW OF FUNDS FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN FIRMS FOREIGN LENDERS FORM OF COLLATERAL GDP GENERAL EQUILIBRIUM GLOBAL FINANCIAL SYSTEM GROSS DEBT HIDDEN INFORMATION HOLDING HOME COUNTRY HOME CREDIT HOST ECONOMIES HOUSEHOLD SAVING HOUSEHOLD SAVINGS HOUSEHOLDS HUMAN CAPITAL INCOME INCOME EFFECT INDUSTRIAL ECONOMIES INEFFICIENCY INTEREST RATE INTEREST RATE CEILINGS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL TRADE INVESTMENT CHOICE INVESTMENT CHOICES INVESTMENT DECISIONS INVESTMENT OPTIONS INVESTMENT PATTERNS INVESTMENT PROJECTS INVESTOR PROTECTION LABOR COSTS LABOR DEMAND LABOR MARKET LABOR MARKETS LABOR PRODUCTIVITY LABOR SUPPLY LACK OF INFORMATION LEGAL SYSTEMS LENDERS LIBERALIZATION OF INTEREST LIQUIDITY MACROECONOMIC EFFECTS MARGINAL BENEFITS MARGINAL COST MARGINAL PRODUCTS MARKET EQUILIBRIUM MONOPOLISTIC COMPETITION MORAL HAZARD MOTIVATION MULTIPLIERS NET EXPORTS NET WORTH OPTIMAL INVESTMENT OUTPUTS PERFECT COMPETITION POLICY RESPONSE POLITICAL ECONOMY POSITIVE EFFECTS PREFERENTIAL ACCESS PRICE CHANGES PRIVATE BANKS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PRUDENTIAL SUPERVISION RATE OF RETURN REAL EXCHANGE RATE REAL INTEREST REAL INTEREST RATE REAL WAGES REPAYMENT RESOURCE ALLOCATION RETURNS SAVINGS SECURITIES SECURITIES MARKETS SELF-FINANCE SOLVENCY TANGIBLE ASSETS TARIFF BARRIERS TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS TRADING TRANSACTION TRANSACTION COSTS TRANSFER OF OWNERSHIP TRANSITION ECONOMIES UNION VALUE ADDED VALUE OF OUTPUT VARIABLE COST WAGES WEALTH WORLD ECONOMY WTO Taylor, Ashley Trade and Financial Sector Reforms : Interactions and Spillovers |
| geographic_facet |
The World Region The World Region |
| relation |
Policy Research working paper ; no. WPS 5279 |
| description |
The allocation of production across
firms is a potentially important explanation of the
productivity gap between rich and poor economies. Reforms to
trade policy and the domestic financial sector are often
both key elements of policy packages aimed at reducing
productive distortions. However, the impact of each reform
in reallocating production within an economy is usually
analyzed independently. This paper asks how do such general
equilibrium effects of trade and domestic financial sector
reforms interact in terms of their effects on productivity,
wages and utility. Motivated by recent firm-level studies, I
add two-way linkages between firms production and exporting
decisions and their financial constraints to a general
equilibrium heterogeneous firm trade model. The interaction
effects between reforms appear qualitatively important.
Trade and domestic financial sector reforms have
complementary effects on the average productivity and size
of domestic producers. However, if much reallocative work
has already been done through a well-functioning financial
sector, the marginal benefits of trade liberalisation for
wages and household utility are reduced. Improvements in the
ability to use exports as pledgeable collateral enhance both
the wage and productivity effects of trade reforms. The
model also highlights the potential for financial sector
reforms in one economy to be exported via the trade channel,
affecting decisions to produce or export in the foreign
economy and putting downward pressure on foreign real wages. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Taylor, Ashley |
| author_facet |
Taylor, Ashley |
| author_sort |
Taylor, Ashley |
| title |
Trade and Financial Sector Reforms : Interactions and Spillovers |
| title_short |
Trade and Financial Sector Reforms : Interactions and Spillovers |
| title_full |
Trade and Financial Sector Reforms : Interactions and Spillovers |
| title_fullStr |
Trade and Financial Sector Reforms : Interactions and Spillovers |
| title_full_unstemmed |
Trade and Financial Sector Reforms : Interactions and Spillovers |
| title_sort |
trade and financial sector reforms : interactions and spillovers |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100423141314 http://hdl.handle.net/10986/3766 |
| _version_ |
1764388220602155008 |
| spelling |
okr-10986-37662021-04-23T14:02:12Z Trade and Financial Sector Reforms : Interactions and Spillovers Taylor, Ashley ACCESS TO FINANCE ADVANCED ECONOMIES AGENCY PROBLEMS AGGREGATE DEMAND AGRICULTURE ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BALANCE OF PAYMENTS BANKING LAWS BANKING SECTOR BANKS BENEFICIAL EFFECTS BILATERAL TRADE BORROWING BORROWING CAPACITY BORROWING COSTS BORROWINGS CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CENTRALLY PLANNED ECONOMY COLLATERAL COMPARATIVE ADVANTAGE CONSUMPTION EXPENDITURE CONSUMPTION LEVELS CONTRACT ENFORCEMENT CORRUPTION COST OF ENTRY COST OF FINANCE COST STRUCTURE CREDIT ALLOCATION CREDIT CONSTRAINT CREDIT CONSTRAINTS CREDIT MARKET CREDIT MARKETS CREDITOR CREDITORS CRISES CURRENT ACCOUNT DEBT DEBT CONTRACTS DEBT REPAYMENTS DERIVATIVE DEVELOPING ECONOMIES DIRECTED CREDIT DISCOUNT RATE DOMESTIC BORROWING DOMESTIC CREDIT DOMESTIC ECONOMY DOMESTIC INTEREST RATE DOMESTIC MARKET DOMESTIC MARKETS DOMESTIC PRICE DOMESTIC PRICES DUMPING ELASTICITY ELASTICITY OF SUBSTITUTION EMERGING ECONOMIES EMERGING MARKETS ENDOGENOUS VARIABLES ENDOWMENTS ENTREPRENEUR ENTREPRENEURS EQUATIONS EQUILIBRIUM EQUILIBRIUM VALUE EQUILIBRIUM VALUES EQUILIBRIUM WAGES EQUITY INVESTMENT EXCHANGE RATE EXCHANGE RATES EXPECTED UTILITY EXPENDITURE EXPORT MARKET EXPORT MARKETS EXPORTER EXPORTERS EXPORTS EXPROPRIATION EXTERNAL FUNDS FINANCIAL CONSTRAINTS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL HEALTH FINANCIAL INSTITUTIONS FINANCIAL LIBERALIZATION FINANCIAL REFORM FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR LIBERALIZATION FINANCIAL SECTOR POLICY FINANCIAL SECTOR REFORMS FINANCIAL SECTORS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FLOW OF FUNDS FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN FIRMS FOREIGN LENDERS FORM OF COLLATERAL GDP GENERAL EQUILIBRIUM GLOBAL FINANCIAL SYSTEM GROSS DEBT HIDDEN INFORMATION HOLDING HOME COUNTRY HOME CREDIT HOST ECONOMIES HOUSEHOLD SAVING HOUSEHOLD SAVINGS HOUSEHOLDS HUMAN CAPITAL INCOME INCOME EFFECT INDUSTRIAL ECONOMIES INEFFICIENCY INTEREST RATE INTEREST RATE CEILINGS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL TRADE INVESTMENT CHOICE INVESTMENT CHOICES INVESTMENT DECISIONS INVESTMENT OPTIONS INVESTMENT PATTERNS INVESTMENT PROJECTS INVESTOR PROTECTION LABOR COSTS LABOR DEMAND LABOR MARKET LABOR MARKETS LABOR PRODUCTIVITY LABOR SUPPLY LACK OF INFORMATION LEGAL SYSTEMS LENDERS LIBERALIZATION OF INTEREST LIQUIDITY MACROECONOMIC EFFECTS MARGINAL BENEFITS MARGINAL COST MARGINAL PRODUCTS MARKET EQUILIBRIUM MONOPOLISTIC COMPETITION MORAL HAZARD MOTIVATION MULTIPLIERS NET EXPORTS NET WORTH OPTIMAL INVESTMENT OUTPUTS PERFECT COMPETITION POLICY RESPONSE POLITICAL ECONOMY POSITIVE EFFECTS PREFERENTIAL ACCESS PRICE CHANGES PRIVATE BANKS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PRUDENTIAL SUPERVISION RATE OF RETURN REAL EXCHANGE RATE REAL INTEREST REAL INTEREST RATE REAL WAGES REPAYMENT RESOURCE ALLOCATION RETURNS SAVINGS SECURITIES SECURITIES MARKETS SELF-FINANCE SOLVENCY TANGIBLE ASSETS TARIFF BARRIERS TOTAL FACTOR PRODUCTIVITY TRADE BARRIERS TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS TRADING TRANSACTION TRANSACTION COSTS TRANSFER OF OWNERSHIP TRANSITION ECONOMIES UNION VALUE ADDED VALUE OF OUTPUT VARIABLE COST WAGES WEALTH WORLD ECONOMY WTO The allocation of production across firms is a potentially important explanation of the productivity gap between rich and poor economies. Reforms to trade policy and the domestic financial sector are often both key elements of policy packages aimed at reducing productive distortions. However, the impact of each reform in reallocating production within an economy is usually analyzed independently. This paper asks how do such general equilibrium effects of trade and domestic financial sector reforms interact in terms of their effects on productivity, wages and utility. Motivated by recent firm-level studies, I add two-way linkages between firms production and exporting decisions and their financial constraints to a general equilibrium heterogeneous firm trade model. The interaction effects between reforms appear qualitatively important. Trade and domestic financial sector reforms have complementary effects on the average productivity and size of domestic producers. However, if much reallocative work has already been done through a well-functioning financial sector, the marginal benefits of trade liberalisation for wages and household utility are reduced. Improvements in the ability to use exports as pledgeable collateral enhance both the wage and productivity effects of trade reforms. The model also highlights the potential for financial sector reforms in one economy to be exported via the trade channel, affecting decisions to produce or export in the foreign economy and putting downward pressure on foreign real wages. 2012-03-19T18:39:26Z 2012-03-19T18:39:26Z 2010-04-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100423141314 http://hdl.handle.net/10986/3766 English Policy Research working paper ; no. WPS 5279 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region |