Advanced Search
MyIDEAS: Login to save this paper or follow this series

Asymmetric Effects of Financial Development on South-South and South-North Trade: Panel Data Evidence from Emerging Markets

Contents:

Author Info

  • Demir, Firat
  • Dahi, Omar S.

Abstract

Using bilateral trade data in total and technology-and-skill-intensive manufactured goods for 28 developing countries that account for 82% of all developing country manufactures exports between 1978 and 2005, this paper explores the effects of financial development on the pattern of specialization in South-South and South-North trade. The empirical results using dynamic panel regressions and comprehensive sensitivity tests suggest that financial development in the South has an economically and statistically significant positive effect on the share of total and technology-and-skill-intensive manufactures exports in GDP, and total exports in South-South trade. In contrast, no such significant or robust effect of financial development is found in South-North trade. Overall, the positive effect of financial development is found to be asymmetric favoring South-South significantly more than South-North trade. In addition, financial development is found to be increasing technology-and-skill-intensive manufactured goods exports significantly more than total manufactured or merchandise goods exports.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/19177/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19177.

as in new window
Length:
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:pra:mprapa:19177

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: South-South and South-North Trade; Financial Development; Industrial Development;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
  2. Kletzer, Kenneth & Bardhan, Pranab, 1986. "Credit Markets and Patterns of International Trade," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1g36f3sd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Lewis, W Arthur, 1980. "The Slowing Down of the Engine of Growth," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 555-64, September.
  4. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers, Center for Global Development 125, Center for Global Development.
  5. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 93-119, March.
  6. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  7. Braun, Matias & Raddatz, Claudio, 2007. "Trade liberalization, capital account liberalization and the real effects of financial development," Journal of International Money and Finance, Elsevier, Elsevier, vol. 26(5), pages 730-761, September.
  8. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
  9. Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
  10. Svaleryd, Helena & Vlachos, Jonas, 2005. "Financial markets, the pattern of industrial specialization and comparative advantage: Evidence from OECD countries," European Economic Review, Elsevier, Elsevier, vol. 49(1), pages 113-144, January.
  11. Wendy Carlin & Colin Mayer, 1999. "Finance, Investment and Growth," OFRC Working Papers Series, Oxford Financial Research Centre 1999fe09, Oxford Financial Research Centre.
  12. Steven A. Sharpe, 1993. "Financial market imperfections, firm leverage and the cyclicality of employment," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 93-10, Board of Governors of the Federal Reserve System (U.S.).
  13. Hausmann, Ricardo & Hwang, Jason & Rodrik, Dani, 2006. "What You Export Matters," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5444, C.E.P.R. Discussion Papers.
  14. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 12(1-2), pages 59-73.
  15. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile, Central Bank of Chile 56, Central Bank of Chile.
  16. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  17. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, Elsevier, vol. 8(2), pages 149-161, April.
  18. Beck, T.H.L., 2002. "Financial development and international trade: Is there a Link?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125515, Tilburg University.
  19. Kroszner, Randall S. & Laeven, Luc & Klingebiel, Daniela, 2007. "Banking crises, financial dependence, and growth," Journal of Financial Economics, Elsevier, Elsevier, vol. 84(1), pages 187-228, April.
  20. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  21. Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance, EconWPA 0403001, EconWPA.
  22. 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, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  23. Copeland, Brian R. & Kotwal, Ashok, 1996. "Product quality and the theory of comparative advantage," European Economic Review, Elsevier, Elsevier, vol. 40(9), pages 1745-1760, December.
  24. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp04-047, Harvard University, John F. Kennedy School of Government.
  25. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  26. An, Galina & Iyigun, Murat F., 2004. "The export skill content, learning by exporting and economic growth," Economics Letters, Elsevier, Elsevier, vol. 84(1), pages 29-34, July.
  27. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  28. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  29. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 63-86, March.
  30. Murphy, Kevin M. & Shleifer, Andrei, 1997. "Quality and trade," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 1-15, June.
  31. Beck, T.H.L., 2003. "Financial dependence and international trade," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125509, Tilburg University.
  32. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 95/13, Department of Economics, Keele University.
  33. Kashyap, Anil K & Lamont, Owen A & Stein, Jeremy C, 1994. "Credit Conditions and the Cyclical Behavior of Inventories," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 565-92, August.
  34. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, American Finance Association, vol. 53(6), pages 2107-2137, December.
  35. Havrylyshyn, Oli, 1985. "The direction of developing country trade : Empirical evidence of differences between South-South and South-North trade," Journal of Development Economics, Elsevier, Elsevier, vol. 19(3), pages 255-281, December.
  36. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
  37. Hur, Jung & Raj, Manoj & Riyanto, Yohanes E., 2006. "Finance and trade: A cross-country empirical analysis on the impact of financial development and asset tangibility on international trade," World Development, Elsevier, Elsevier, vol. 34(10), pages 1728-1741, October.
  38. William Darity & Lewis S. Davis, 2005. "Growth, trade and uneven development," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 29(1), pages 141-170, January.
  39. Dutt, Amitava Krishna, 1986. "Vertical trading and uneven development," Journal of Development Economics, Elsevier, Elsevier, vol. 20(2), pages 339-359, March.
  40. Amsden, Alice H, 1980. "The Industry Characteristics of Intra-Third World Trade in Manufactures," Economic Development and Cultural Change, University of Chicago Press, vol. 29(1), pages 1-19, October.
  41. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 381-405, December.
  42. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, Elsevier, vol. 126(1), pages 25-51, May.
  43. Panicos Demetriades & Siong Hook Law, 2006. "Finance, institutions and economic development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(3), pages 245-260.
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 in new window

Cited by:
  1. Mustafa Caglayan & Omar S. Dahi & Firat Demir, 2013. "EsTrade Flows, Exchange Rate Uncertainty, and Financial Depth: Evidence from 28 Emerging Countries," Southern Economic Journal, Southern Economic Association, vol. 79(4), pages 905-927, April.
  2. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, Elsevier, vol. 13(2), pages 159-183.
  3. Omar S. Dahi & Firat Demir, 2013. "Preferential trade agreements and manufactured goods exports: does it matter whom you PTA with?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(34), pages 4754-4772, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19177. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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