IDEAS home Printed from https://ideas.repec.org/a/wsi/jicepx/v10y2019i03ns1793993319500121.html
   My bibliography  Save this article

Effect of Export Upgrading on Financial Development

Author

Listed:
  • Sèna Kimm Gnangnon

    (Development Division World Trade Organization, Ruede Lausanne 154, Geneva 21, CH-1211, Switzerland)

Abstract

Using a panel dataset comprising 137 countries (both developed and developing countries) over the period 1970–2010, this paper has examined the effect of export upgrading (i.e., export product diversification and export product quality improvement) on financial development. The findings suggest that export product diversification and export product quality improvement influence positively and significantly financial development in high income countries (HICs) and developing countries alike. However, for least developed countries (LDCs), export product diversification promotes financial development, but export product quality improvement exerts a negative effect on financial development.

Suggested Citation

  • Sèna Kimm Gnangnon, 2019. "Effect of Export Upgrading on Financial Development," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 1-37, October.
    • Handle: RePEc:wsi:jicepx:v:10:y:2019:i:03:n:s1793993319500121
    DOI: 10.1142/S1793993319500121
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1793993319500121
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S1793993319500121?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    2. Franklin Allen & Elena Carletti & Robert Cull & Jun Qian & Lemma Senbet & Patricio Valenzuela, 2014. "Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya," NBER Chapters, in: African Successes, Volume III: Modernization and Development, pages 13-62, National Bureau of Economic Research, Inc.
    3. Christian Henn & Chris Papageorgiou & Jose Manuel Romero & Nikola Spatafora, 2020. "Export Quality in Advanced and Developing Economies: Evidence from a New Data Set," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(2), pages 421-451, June.
    4. Hatra Voghouei & M. Azali & Siong Hook Law, 2011. "Does the Political Institution Matter for Financial Development?," Economic Papers, The Economic Society of Australia, vol. 30(1), pages 77-98, March.
    5. Michael Enowbi‐Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 2(1), pages 35-59, April.
    6. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    7. Rabah Arezki & Frederick van der Ploeg, 2007. "Can the Natural Resource Curse Be Turned into a Blessing? The Role of Trade Policies and Institutions," Economics Working Papers ECO2007/35, European University Institute.
    8. Levy Yeyati, Eduardo & Panizza, Ugo & Stein, Ernesto, 2007. "The cyclical nature of North-South FDI flows," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 104-130, February.
    9. Daron Acemoglu, 2008. "Oligarchic Versus Democratic Societies," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 1-44, March.
    10. Kletzer, Kenneth & Bardhan, Pranab, 1987. "Credit markets and patterns of international trade," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 57-70, October.
    11. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    12. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    13. David Greenaway & Wyn Morgan & Peter Wright, 1999. "Exports, export composition and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(1), pages 41-51.
    14. Sourafel Girma & Anja Shortland, 2008. "The political economy of financial development," Oxford Economic Papers, Oxford University Press, vol. 60(4), pages 567-596, October.
    15. Zhang, Chengsi & Zhu, Yueteng & Lu, Zhe, 2015. "Trade openness, financial openness, and financial development in China," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 287-309.
    16. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
    17. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-276, June.
    18. Mona Haddad & Jamus Jerome Lim & Cosimo Pancaro & Christian Saborowski, 2013. "Trade openness reduces growth volatility when countries are well diversified," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 765-790, May.
    19. Wiig, Arne & Kolstad, Ivar, 2012. "If diversification is good, why don't countries diversify more? The political economy of diversification in resource-rich countries," Energy Policy, Elsevier, vol. 40(C), pages 196-203.
    20. Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
    21. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    22. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    23. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    24. Becerra, O. & Cavallo, E. & Scartascini, C., 2012. "The politics of financial development: The role of interest groups and government capabilities," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 626-643.
    25. Yongfu Huang & Jonathan Temple, 2005. "Does external trade promote financial development?," Bristol Economics Discussion Papers 05/575, School of Economics, University of Bristol, UK.
    26. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc.
    27. Yang, Benhua, 2011. "Does democracy foster financial development? An empirical analysis," Economics Letters, Elsevier, vol. 112(3), pages 262-265, September.
    28. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    29. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    30. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    31. Nils Herger & Roland Hodler & Michael Lobsiger, 2008. "What Determines Financial Development? Culture, Institutions or Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 558-587, October.
    32. Acemoglu, Daron & Robinson, James A., 2006. "Economic Backwardness in Political Perspective," American Political Science Review, Cambridge University Press, vol. 100(1), pages 115-131, February.
    33. Ben Naceur, Samy & Ghazouani, Samir & Omran, Mohammed, 2008. "Does stock market liberalization spur financial and economic development in the MENA region?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 673-693, December.
    34. Anne-Gaël Vaubourg, 2016. "Finance and International Trade: A Review of the Literature," Revue d'économie politique, Dalloz, vol. 126(1), pages 57-87.
    35. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
    36. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
    37. Ziliak, James P, 1997. "Efficient Estimation with Panel Data When Instruments Are Predetermined: An Empirical Comparison of Moment-Condition Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(4), pages 419-431, October.
    38. Wafa Ghardallou, 2016. "Does democratic transition spur financial development?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 8(4), pages 499-513, November.
    39. Ricardo Hausmann & Roberto Rigobon, 2003. "An Alternative Interpretation of the 'Resource Curse': Theory and Policy Implications," NBER Working Papers 9424, National Bureau of Economic Research, Inc.
    40. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    41. Hauner, David & Prati, Alessandro & Bircan, Cagatay, 2013. "The interest group theory of financial development: Evidence from regulation," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 895-906.
    42. Hattendorff, Christian, 2014. "Natural resources, export concentration and financial development," Discussion Papers 2014/34, Free University Berlin, School of Business & Economics.
    43. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    44. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
    45. Mr. Antonio David & Mr. Montfort Mlachila & Ashwin Moheeput, 2014. "Does Openness Matter for Financial Development in Africa?," IMF Working Papers 2014/094, International Monetary Fund.
    46. Ross Levine, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
    47. Mr. Thierry Tressel & Ms. Enrica Detragiache, 2008. "Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset," IMF Working Papers 2008/265, International Monetary Fund.
    48. Salvatore Capasso, 2004. "Financial Markets, Development and Economic Growth: Tales of Informational Asymmetries," Journal of Economic Surveys, Wiley Blackwell, vol. 18, pages 267-292, July.
    49. Chris Alexander & Ken Warwick, 2007. "Governments, Exports and Growth: Responding to the Challenges and Opportunities of Globalisation," The World Economy, Wiley Blackwell, vol. 30(1), pages 177-194, January.
    50. Wim Naudé & Maarten Bosker & Marianne Matthee, 2010. "Export Specialisation and Local Economic Growth," The World Economy, Wiley Blackwell, vol. 33(4), pages 552-572, April.
    51. Huang, Yongfu, 2010. "Political Institutions and Financial Development: An Empirical Study," World Development, Elsevier, vol. 38(12), pages 1667-1677, December.
    52. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2000. "A New Database on the Structure and Development of the Financial Sector," The World Bank Economic Review, World Bank, vol. 14(3), pages 597-605, September.
    53. Dierk Herzer & Nowak-Lehnmann Felicitas, 2006. "What does export diversification do for growth? An econometric analysis," Applied Economics, Taylor & Francis Journals, vol. 38(15), pages 1825-1838.
    54. Mr. Rodney Ramcharan, 2006. "Does Economic Diversification Lead to Financial Development? Evidence From topography," IMF Working Papers 2006/035, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mougnol A Ekoula, Hervé William & Kamguia, Brice & Ndoya, Hermann, 2023. "Do women hold the key to financial sector development in Africa?," International Economics, Elsevier, vol. 173(C), pages 233-248.
    2. Gnangnon, Sèna Kimm, 2021. "Effect of poverty on financial development: Does trade openness matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 97-112.
    3. Sèna Kimm Gnangnon, 2022. "Export diversification and financial openness," International Economics and Economic Policy, Springer, vol. 19(4), pages 675-717, October.
    4. Gnangnon, Sèna Kimm, 2022. "Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    5. Sèna Kimm Gnangnon, 2023. "Effect of Aid-for-Trade Flows on Investment-Oriented Remittance Flows," JRFM, MDPI, vol. 16(2), pages 1-36, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chris Doucouliagos & Jakob de Haan & Jan-Egbert Sturm, 2022. "What drives financial development? A Meta-regression analysis [A new database of financial reforms]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 840-868.
    2. Gnangnon, Sèna Kimm, 2021. "Effect of poverty on financial development: Does trade openness matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 97-112.
    3. Olufemi Adewale Aluko & Oladapo Fapetu & Julius Oyebanji Ibitoye, 2021. "Do Openness and Democracy Deepen Banking Sector in Sub-Saharan Africa?," Global Business Review, International Management Institute, vol. 22(2), pages 279-289, April.
    4. S K Gnangnon, 2023. "Effect of Aid for Trade on Financial Development," Economic Issues Journal Articles, Economic Issues, vol. 28(2), pages 1-38, September.
    5. Jean-Pierre Allegret & Sana Azzabi, 2014. "Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier," Revue d’économie du développement, De Boeck Université, vol. 22(3), pages 27-68.
    6. Siong Law & W. Azman-Saini, 2012. "Institutional quality, governance, and financial development," Economics of Governance, Springer, vol. 13(3), pages 217-236, September.
    7. Gnangnon, Sèna Kimm, 2019. "Financial Development and Tax Revenue in Developing Countries: Investigating the International Trade and Economic Growth Channels," EconStor Preprints 206628, ZBW - Leibniz Information Centre for Economics.
    8. Becerra, O. & Cavallo, E. & Scartascini, C., 2012. "The politics of financial development: The role of interest groups and government capabilities," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 626-643.
    9. Nazima Ellahi & Adiqa Kausar Kiani & Muhammad Awais & Hina Affandi & Rabia Saghir & Sarah Qaim, 2021. "Investigating the Institutional Determinants of Financial Development: Empirical Evidence From SAARC Countries," SAGE Open, , vol. 11(2), pages 21582440211, April.
    10. Wafa Ghardallou, 2022. "Financial System Development and Democracy: a Panel Smooth Transition Regression Approach for Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1714-1735, June.
    11. Ioannis FILIPPIDIS & Constantinos KATRAKILIDIS, 2014. "Institutions, Policy and Banking Sector Development: A Reassessment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 501-521, December.
    12. Raja Almarzoqi & Sami Ben Naceur & Akshay Kotak, 2015. "What Matters for Financial Development and Stability?," IMF Working Papers 2015/173, International Monetary Fund.
    13. Sèna Kimm Gnangnon, 2021. "Development aid and services export diversification," International Journal of Economic Policy Studies, Springer, vol. 15(1), pages 125-156, February.
    14. Law, Siong Hook & Singh, Nirvikar, 2014. "Does too much finance harm economic growth?," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 36-44.
    15. Gnangnon, Sèna Kimm & Roberts, Michael, 2015. "Aid for trade, foreign direct investment and export upgrading in recipient countries," WTO Staff Working Papers ERSD-2015-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Sèna Kimm Gnangnon, 2022. "Export diversification and financial openness," International Economics and Economic Policy, Springer, vol. 19(4), pages 675-717, October.
    17. Sèna Kimm Gnangnon, 2022. "Financial development and tax revenue in developing countries: investigating the international trade channel," SN Business & Economics, Springer, vol. 2(1), pages 1-26, January.
    18. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    19. Yongfu Huang & Jonathan Temple, 2005. "Does external trade promote financial development?," Bristol Economics Discussion Papers 05/575, School of Economics, University of Bristol, UK.
    20. Gnangnon, Sèna Kimm & Iyer, Harish, 2021. "Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences offered by the QUAD countries," EconStor Preprints 238211, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    Export upgrading; financial development;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:jicepx:v:10:y:2019:i:03:n:s1793993319500121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/jicep/jicep.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.