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 ex- ternal fi nance in production. This e ffect is likely to be stronger in countries with high-quality institutions. Using pure cross-sectional and panel speci fications on a sample of 75 countries over the period 1971-2010, we find that financial development strongly and robustly exerts a positive eff ect on manufacturing exports, even after controlling for the eff ect of banking crises. Furthermore, institutional quality is found to have a favorable eff ect 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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Date of creation: 05 Nov 2012
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Financial Development; Manufacturing Exports; Comparative Advantages; Institutional Quality;
Other versions of this item:
- Youssouf Kiendrebeogo, 2012. "The effects of financial development on trade performance and the role of institutions," Economics Bulletin, AccessEcon, vol. 32(3), pages 2546-2559.
- Youssouf KIENDREBEOGO, 2012. "The E ffects of Financial Development on Trade Performance and the Role of Institutions," Working Papers 201235, CERDI.
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-INT-2012-11-17 (International Trade)
- NEP-MFD-2012-11-17 (Microfinance)
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