Trade in Financial Services and Capital Movements

Author: Ms. Natalia T. Tamirisa

International financial liberalization may alter saving-investment imbalances and patterns of capital flows across countries. In a panel of OECD countries for 1990-96, this study examines how the liberalization of capital movements and financial services trade affects net private capital flows. Capital inflows tend to fall (rise) with the liberalization of commercial presence in banking and securities (insurance) services, possibly reflecting an increase (decrease) in saving. Capital account liberalization is found to stimulate capital inflows, suggesting that better access to external financing helps sustain larger fiscal and current account deficits. When cross-border trade is liberalized, capital flows change insignificantly.

Volume/Issue: Volume 1999 Issue 089

Publication date: July 1999

ISBN: 9781451851267

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Topics covered in this book

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Business and Economics , Exports and Imports , WP , financial service , capital flow , liberalization , capital , financial service supplier , market equilibrium , trade in financial services , capital mobility , financial service service sector , net capital flow , saving-investment imbalance , capital constraint , A , capital movement , market discipline , market participant , saving-investment gap , Capital flows , Trade in services , Capital controls , Capital inflows

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Summary

International financial liberalization may alter saving-investment imbalances and patterns of capital flows across countries. In a panel of OECD countries for 1990–96, this study examines how the liberalization of capital movements and financial services trade affects net private capital flows. Capital inflows tend to fall (rise) with the liberalization of commercial presence in banking and securities (insurance) services, possibly reflecting an increase (decrease) in saving. Capital account liberalization is found to stimulate capital inflows, suggesting that better access to external financing helps sustain larger fiscal and current account deficits. When cross-border trade is liberalized, capital flows change insignificantly.