publication . Preprint . 2003

International Good Market Segmentation and Financial Market Structure

Basak, Suleyman; Croitoru, Benjamin;
Open Access
  • Published: 01 Sep 2003
Abstract
While financial markets have recently become more complete and international capital flows well liberalized, markets for goods remain segmented. To investigate how more complete security markets may relieve the effects of this segmentation, we examine a series of two-country economies with internationally segmented good markets, distinguished by the available financial securities. We show that, under heterogeneity within countries, the financial structure matters: even with internationally complete financial markets, risk sharing is limited and the equilibrium allocation may be inefficient, depending on the location of the securities. Sufficient conditions for e...
Subjects
free text keywords: financial innovation; international capital flows; market segmentation; risk sharing, jel:F30, jel:F36, jel:G12, jel:G15
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