Financial Sector Competition, Services Trade, and Growth
Tinbergen Institute Working Paper No. 2002-089/2
26 Pages Posted: 7 Nov 2002
Date Written: September 2002
We explore dynamic linkages between financial/banking sector openness, financial sector competition, and growth. We first develop an analytical model, highlighting links between long-run economic performance and services trade, through scale economies and market and cost structures in the financial services sector. This is followed by an econometric exercise based on data for 130 countries for the 1990s. Our results point to a strong positive relationship between financial sector competition/performance and financial sector openness (meaning foreign bank access to domestic markets), and between growth and financial sector competition/performance. They also point to the presence of scale economies in the sector.
Keywords: Financial services trade, financial sector openness, service trade and imperfect competition, trade in services and growth, banking and growth
JEL Classification: F40, F13, F43, G15
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