Financial Super-Markets: Size Matters for Asset Trade / Philippe Martin, Helene Rey.

Format:

Book

Author/Creator:

Martin, Philippe.

Contributor:

National Bureau of Economic Research.

Rey, Helene.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8476.

NBER working paper series no. w8476

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Financial Super-Markets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is endogenous, and cross-border asset trade entails transaction costs. We show that demand effects have important implications for the link between market size, asset prices and financial market development. These effects are consistent with existing empirical evidence. Due to co-ordination failures, the extent of financial market incompleteness is inefficiently high. We also analyze the impact of domestic transaction costs and issuing costs on financial markets and returns.

Notes:

Print version record

September 2001.