6.7

Financial markets and their regulation

The liberalisation of financial markets facilitated cross-border payments, and thus, the international exchange of goods and services. At the same time, the international financial system remains vulnerable to crises. This project endeavours to focus on two of the unresolved questions about the interrelationships between trade and finance.

The first research topic relates to commercial banks in their capacity to run the international payment system, provide trade finance and insurance, monitor investment, or mobilise savings. Thereby, the role of banking regulation such as the measures stipulated by the Basel Agreements lies primarily in preventing the occurrence of bank-runs and banking crises (or at least limiting the economic damages thereof). The primary research focus is on comparing different policies such as deposit insurances, solvency regulation, banking supervision, or lender of last resort schemes in general, and their capacity to offset some of the fragility in the banking system in particular. The second research topic considers the distributional consequences of (imperfect) financial institutions when countries open up to trade. Financial institutions are important to determine how income is redistributed within the class of entrepreneurs after the implementation of major trade liberalisation steps. This helps to ascertain which individual groups lose from opening up to trade and explains why many developing countries still have substantial trade barriers.

internal linkage

foellmi_r herger_n oechslin_m
Market Imperfections, Wealth (...) Targeting Autocrats: (...) How do Export Risk (...) Market Imperfections, Wealth (...) Targeting autocrates: (...) Impact assessment of (...) European Trade Study Group

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