The Interactions Between Trade Openness And Fianancial Openness

The papers of interactions on trade openness and financial openness are generalized. Mundell (1957) provided that free migration of commodities and factor between countries can be completely replaced. And then it is found by other scholars that the migrations of commodities and factor can be complemented in hierarchy different countries or industries which cause the obstacles for free mobility because of resources assignment. The simple theoretical models are got in a series of assumption which can be implemented in the real economic world. So the better theoretical model of better approaching to the reality are prompted in the paper and synthesized analyzed method replaces independent analysis of replacement effects and complementing ones.So three kinds of indirectly channels are induced, they are scale effects, industry transfer and technologies effects.Firstly, trade openness and financial openness can indirectly interact by scale effects channel. Trade openness expands commodity markets, and industries with scale economics get the power to increase their scales. So the needs of more financing ways, more capital and lower lending cost are created. Financial openness which is a good way to resolve these problems is needed and continues increase with trade openness. At the same time, financial openness affords more competitions in financial markets and financing cost and chances for most enterprises are made better. And then industries with scale economics get better conditions to produce commodities. The bigger production market becomes these industry's requirements, so trade openness is needed.Secondly, trade openness and financial openness can indirectly interact by industry transfer. A model is constructed and proved that same production has different cost because of factors endowment in different closed economies. Trade openness makes industries to reassign in the world and industry transfer happens. External capital can decrease transfer cost and save time. So, for getting more capital with less cost industry transfer needs financial openness. Financial openness lets capital move to countries with higher returns and compared advantages are changed, then industries begin to transfer according to new factors endowment and less cost productions needs bigger market and trade openness is impelled. Thirdly, trade openness and financial openness can indirectly interact by technology effect. By building an interacting model proves that trade openness can induce technologies inflows and overflows. And new technologies improve financial openness by two ways:(1) communication technologies, management ones, and so on which improve operation efficiency; (2) new productions are created, like productions based on internet. So, financial industry gets more power to expand their business and create new profits in international markets, financial openness is need. And financial openness affords more capital for technologies research and distributes risks. Technology improvement affords more technical diversifications and productions ones, and intra-industry and inter-industry trades rise.At last, statistical models are used to test the theory.Firstly, the paper uses OECD countries data to test indirectly interaction between trade openness and trade openness. Trade openness is positively affected by technology effects, scale effects and industry transfer. Financial openness is positively affected by financial development level, technology improvement, scale economy, but not affected by industry transfer. Technology level is mainly positively affected by itself and research expenses and trade openness and financial openness, but the two latter have less coefficients, scale effects and industry transfer are statistical insignificance. Scale effect is positively affected by itself and trade openness, industry transfer, financial openness and technology effects are statistical insignificance. Industry transfer are positively affected by itself, scale effects and financial openness, and negatively affected by trade openness. Technology effects have statistical insignificance to it.Secondly, the paper compares industry transfer indirectly interaction channel of trade openness and financial openness of developing countries and developed countries. It is found that developed countries accelerate industry transfer by financial openness and transfer traditional manufacture industry out and develop domestic finance industry. And developing countries take industries transferred out by develop countries, finance industry is depressed because of competitors from developed countries.Thirdly, the paper tests the indirect interaction channels between trade openness and financial openness in China. Trade openness is positively affected by scale effect and industry transfer and negatively by technology effects. Financial openness is only positively affected by industry transfer, and statistical insignificance with other channels. Technology effects are positive interactive relationship with industry transfer and scale effects. But the two latter has negative interactive relationship. So there are interactive channel, industry channel, between trade openness and financial openness.