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Interregional arbitrage and the supply of loanable funds - a model of intermediate financial capital mobility

Harrigan, F.J. and McGregor, P.G. (1987) Interregional arbitrage and the supply of loanable funds - a model of intermediate financial capital mobility. Journal of Regional Science, 27 (3). pp. 357-367. ISSN 0022-4146

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Abstract

This paper develops a model of regional financial markets which can encompass different degrees of spatial financial integration. The behavior of the system is analyzed under alternative assumptions about the time frame of analysis and the extent of the flexibility of interest rates. It is argued that links may exist between regional real and financial sectors even in the short run and that such links must, through the regional balance of payments, exist in the long run, even where there is perfect financial spatial integration. It is observed that these relationships have generally been ignored by regional economic model builders.