Intra-industry trade in financial services

Intra-industry trade (IIT) has been central to increasing the variety of products available to consumers. Unlike traditional trade theories, the recent trade theories have placed an emphasis on the role of foreign direct investment (FDI) in generating trade and increasing the volume of IIT. This study is the first study of intra-industry trade in banking services in which the key elements of the new trade theories of IIT have been taken into account in measuring the determinants of IIT in banking services. The empirical results of the determinants of IIT in banking services indicate that factor endowments, average per-capita income, FDI in banking, economies of scale in the banking sector, trade intensity between the US and its partners and market openness make a positive contribution to the volume of IIT in banking services. Furthermore, the empirical results indicate that intra-trade activities amongst the US multinational corporations reduce the level of IIT in banking services for the US.