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Does External Trade Promote Financial Development?

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Author Info
Huang, Yongfu
Temple, Jonathan

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Abstract

Several recent papers have argued that trade and financial development may be linked, either for political economy reasons, or because foreign competition and exposure to shocks lead to changes in the demand for external finance. In this paper we use the cross-country and time-series variation in openness to study the relationship between trade and finance in more detail. Our results suggest that increases in goods market openness are typically followed by sustained increases in financial depth.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5150.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5150

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Related research
Keywords: financial development; openness; trade;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2007. "Financial Development, Openness and Institutions: Evidence from Panel Data," Discussion Papers in Economics 07/05, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  2. Wei Huang, 2006. "Emerging Markets, Financial Openness and Financial Development," Bristol Economics Discussion Papers 06/588, Department of Economics, University of Bristol, UK. [Downloadable!]
  3. Law, Siong Hook & Azman-Saini, W.N.W., 2008. "The Quality of Institutions and Financial Development," MPRA Paper 12107, University Library of Munich, Germany. [Downloadable!]
  4. Nils Herger & Roland Hodler & Michael Lobsinger, 2007. "What determines Financial Development? Culture, Institutions, or Trade," DEGIT Conference Papers c012_033, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  5. Coviello, Decio & Islam, Roumeen, 2006. "Does aid help improve economic institutions ?," Policy Research Working Paper Series 3990, The World Bank. [Downloadable!]
  6. Yongfu Huang, 2005. "Will political liberalisation bring about financial development?," Bristol Economics Discussion Papers 05/578, Department of Economics, University of Bristol, UK. [Downloadable!]
  7. Andreas Billmeier & Isabella Massa, 2007. "What Drives Stock Market Development in the Middle East and Central Asia--Institutions, Remittances, or Natural Resources?," IMF Working Papers 07/157, International Monetary Fund. [Downloadable!]
  8. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, Department of Economics, University of Bristol, UK. [Downloadable!]
  9. Yongfu Huang, 2006. "Private investment and financial development in a globalized world," Bristol Economics Discussion Papers 06/589, Department of Economics, University of Bristol, UK. [Downloadable!]
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