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Financial development and international trade: Is there a link?

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  • Beck, Thorsten

Abstract

The author explores a possible link between financial development and trade in manufactures. His theoretical model focuses on the role of financial intermediaries in facilitating large-scale, high-return projects. Results show that economies with better developed financial sectors have a comparative advantage in manufacturing industries. He provides evidence for this hypothesis, first proposed by Kletzer and Bardhan (1987), using a 30-year panel of data for 65 countries. Controlling for country-specific effects and possible reverse causality, he shows that financial development exerts a large causal impact on the level of both exports and the trade balance of manufactured goods.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 57 (2002)
Issue (Month): 1 (June)
Pages: 107-131

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Handle: RePEc:eee:inecon:v:57:y:2002:i:1:p:107-131

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Web page: http://www.elsevier.com/locate/inca/505552

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  1. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
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  5. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
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  18. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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  22. repec:cup:macdyn:v:5:y:2001:i:3:p:413-33 is not listed on IDEAS
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