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Does financial integration drive export diversification? Evidence from a cross-country analysis

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  • Bhushan Praveen Jangam
  • Vaseem Akram

Abstract

Purpose - The purpose of this paper is to examine the nexus between financial integration and export diversification. Design/methodology/approach - The authors consider 96 economies spanning over the period 1995-2014. To provide broader insights, the authors categorize 96 economies into developed, developing, high and low diversified panels. Both volume and equity-based measures of financial integration are used. The generalized method of moments (GMM) method is used to analyze the link between financial integration and export diversification. Findings - The results derived from GMM indicate that financial integration is a vital factor of export diversification. Further, the findings reveal similar conclusions for developed, developing, high and low diversified panels. Research limitations/implications - The outcome of this study suggests that promoting the financial integration of markets by lowering the restrictions on capital inflows helps countries to lower the risk and diversify their exports. Originality/value - Though there exists enormous literature on export diversification, the nexus between financial integration and export diversification is limited. The present study bridges this research gap.

Suggested Citation

  • Bhushan Praveen Jangam & Vaseem Akram, 2020. "Does financial integration drive export diversification? Evidence from a cross-country analysis," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 13(1), pages 45-61, April.
    • Handle: RePEc:eme:jfeppp:jfep-06-2019-0110
    DOI: 10.1108/JFEP-06-2019-0110
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    References listed on IDEAS

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    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2010. "Financial Globalization and Economic Policies," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4283-4359, Elsevier.
    3. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    4. Dennis, Allen & Shepherd, Ben, 2007. "Trade costs, barriers to entry, and export diversification in developing countries," Policy Research Working Paper Series 4368, The World Bank.
    5. Maurice Obstfeld, 2008. "International Finance and Growth in Developing Countries," World Bank Publications - Books, The World Bank Group, number 28029.
    6. Mélise Jaud & Madina Kukenova, 2011. "Financial development and survival of African agri-food exports," Working Papers halshs-00586320, HAL.
    7. Heiko Hesse, 2008. "Export Diversification and Economic Growth," World Bank Publications - Books, The World Bank Group, number 28040.
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    Cited by:

    1. Abdoul Rachid Issoufou Dogo, 2024. "Impact de l'intégration financière régionale sur le commerce intra régional des produits manufacturés dans la zone CEDEAO," African Development Review, African Development Bank, vol. 36(2), pages 292-305, June.

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    More about this item

    Keywords

    Financial integration; Export diversification; System GMM; Cross-country analysis; Diversification; International finance; Economic integration; Econometric and statistical method; F1; F3; C23;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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