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Financial development and international trade: Is there a link?

  • Beck, Thorsten

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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