Trade and Domestic Financial Market Reform Under Political Uncertainty Implications for Investment, Savings, and the Real Exchange Rate

This paper presents a model that incorporates uncertainty about trade reform and analyzes the effects of trade and financial liberalization on domestic investment and savings, the current account balance and the real exchange rate, both when the capital account is open and when it is closed. Under c...

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Bibliographic Details
Main Author: Bhattacharya, Rina
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2000
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Trade and Domestic Financial Market Reform Under Political Uncertainty  |b Implications for Investment, Savings, and the Real Exchange Rate  |c Rina Bhattacharya 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2000 
300 |a 34 pages 
651 4 |a Mexico 
653 |a Wealth 
653 |a Public finance & taxation 
653 |a Currency; Foreign exchange 
653 |a Taxes 
653 |a Trade Policy 
653 |a Exports and Imports 
653 |a Capital account 
653 |a Intangible Capital 
653 |a Domestic savings 
653 |a National accounts 
653 |a Foreign Exchange 
653 |a International trade 
653 |a Macroeconomics 
653 |a Capacity 
653 |a Capital 
653 |a Taxation 
653 |a Foreign exchange 
653 |a Investment 
653 |a Tariffs 
653 |a Tariff 
653 |a International Trade Organizations 
653 |a Short-term Capital Movements 
653 |a Saving 
653 |a Current Account Adjustment 
653 |a Trade liberalization 
653 |a Balance of payments 
653 |a Long-term Capital Movements 
653 |a Aggregate Factor Income Distribution 
653 |a International economics 
653 |a Commercial policy 
653 |a Saving and investment 
653 |a Macroeconomics: Consumption 
653 |a Real exchange rates 
653 |a International Investment 
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989 |b IMF  |a International Monetary Fund 
490 0 |a IMF Working Papers 
028 5 0 |a 10.5089/9781451858747.001 
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520 |a This paper presents a model that incorporates uncertainty about trade reform and analyzes the effects of trade and financial liberalization on domestic investment and savings, the current account balance and the real exchange rate, both when the capital account is open and when it is closed. Under certain assumptions financial liberalization leads to a movement of resources in the opposite direction to that implied by trade liberalization and to real exchange rate appreciation, thus defeating one of the objectives of tariff reform, when the capital account is open. When political economy linkages are taken into account, however, the indirect effects of financial liberalization may offset the direct effects, encouraging a movement of resources in the desired direction. With a closed capital account these results should still hold unless there are strong negative income effects from trade reform