In this paper we analyze some policy implications of incompleteness of markets in trade models, where there is both inter-spatial and intertemporal trade between countries. We interpret the absence of intertemporal trade as an absence of intermediation services provided by both domestic and foreign service providers. For simplicity, we consider extreme cases where intertemporal intermediation s...

This paper develops a simple theoretical framework to explore the role of banks, bank inefficiencies and financial liberalization in explaining the sustained interest rate premium offered in a number of emerging economies in East Asia despite evidence of fairly credible ex-ante fixed exchange rates (Thailand in particular).