The effects of financial development on trade performance and the role of institutions
AbstractThis paper aims to address the empirical question of whether a country's level of manufacturing trade is affected by its financial sector development and to investigate the role of institutions in this relationship. Countries endowed with better-developed financial systems tend to specialize in industries that rely on external finance in production. This effect is likely to be stronger in countries with high-quality institutions. Using cross-sectional and panel specifications on a sample of 75 countries over the period 1971-2010, we find that financial development strongly and robustly exerts a positive effect on manufacturing exports, even after controlling for the effect of banking crises. Furthermore, institutional quality is found to have a favorable effect on the extent to which finance influences manufacturing trade, suggesting a multiplicity of experiences of the largest exporters of manufactured goods.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
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Financial Development; Manufacturing Exports; Comparative Advantages; Institutional Quality;
Other versions of this item:
- Youssouf KIENDREBEOGO, 2012. "The E ffects of Financial Development on Trade Performance and the Role of Institutions," Working Papers 201235, CERDI.
- Youssouf KIENDREBEOGO, 2012. "The Effects of Financial Development on Trade Performance and the Role of Institutions," Working Papers halshs-00748544, HAL.
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
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