Gains from Trade and the Sovereign Bond Market

42 Pages Posted: 5 Jan 2019 Last revised: 26 Feb 2020

See all articles by Ayumu Ken Kikkawa

Ayumu Ken Kikkawa

University of British Columbia (UBC) - Sauder School of Business

Akira Sasahara

Keio University

Date Written: December 21, 2018

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

JEL Classification: F14, F60, O19

Suggested Citation

Kikkawa, Ayumu Ken and Sasahara, Akira, Gains from Trade and the Sovereign Bond Market (December 21, 2018). Available at SSRN: https://ssrn.com/abstract=3304936 or http://dx.doi.org/10.2139/ssrn.3304936

Ayumu Ken Kikkawa

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Akira Sasahara (Contact Author)

Keio University ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

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