Liberalising Trade in Financial Services

Global and Regional Economic Effects

This paper applies a global general equilibrium model to quantify the impact on the global and regional economies of liberalising trade in financial services. The paper uses recent estimates of trade barriers for financial services in both developed and developing countries. The simulation results indicate that liberalising trade in financial services would benefit the world as a whole in terms of increased real income. Most regions are projected to gain as well, although the distribution of gains among regions is not even. In general, regions with the highest barriers, such as developing countries, benefit most. The analysis demonstrates that commercial presence of foreign firms via foreign direct investment (FDI) is a major source of gains from services trade liberalisation.