We examine whether financial sector integration leads to real sector integration through trade. Our conjecture is that banking integration between two regions leads to higher trade flows between them. In our stylized model, this happens because banks with presence in the two regions are better...

The home market effect is considered as a distinguishing feature of models of trade with increasing returns to scale in production and imperfect competition. However, some empirical studies found the existence of home market effect even in constant returns to scale industries. In this paper we...