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Applied Economics Letters Volume 19, 2012 - Issue 8
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Original Articles

A simple model of two-country bargaining for financial integration

Xinhua Gu Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Taipa, MacauCorrespondence[email protected]
&
Baomin Dong International Economics Section, School of Economics, Zhejiang University, Hangzhou, Zhejiang Province, Hangzhou, Zhejiang Province, PR China; Department of Economics, University of International Business and Economics, Beijing, PR China
Pages 725-728 | Published online: 09 Sep 2011
 
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Abstract

This article treats financial openness as a practical dimension on which two countries can negotiate for capital mobility benefit sharing. A capital-exporting country has some first-mover advantage in bargaining with its importing counterparts for their opening. Yet the former country's impatience can act against its own interests when faced with the latter's reluctance to fully liberalize financial systems. Hence it may be unwise to push them into prematurely opening up their capital markets.

JEL Classification:

Acknowledgement

This article is based on a research project (RG002/09-10S/GXH/FBA) funded by the University of Macau.

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