Borders and the Constraints on Globalization
35 Pages Posted: 24 Jan 2007
Date Written: October 2003
National borders are a big hurdle to the expansion of the open economy. Integration today remains imperfect because national borders translate into trading costs, including differences in monetary regimes. Political borders shelter many goods and services from external competition and, consequently, represent a critical exogenous force in the integration process. Borders are thicker for the small countries than the large countries. Regional trade arrangements have softened or, in some cases, pushed outward national borders, but in the process new borders have emerged. Borders affect also finance and monies. While the speed of financial integration suggests currency consolidation and a decline in the ratio of independent monies to sovereign nations, the formation of multilateral monetary unions pushes the ratio towards unity.
Keywords: borders, integration, gravity model, RTA, monetary unions
JEL Classification: E58, F15, F33, G15
Suggested Citation: Suggested Citation