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Does fi nancial development promote international trade? —Evidence from China

Author

Listed:
  • BAO Qun

    (School of Economics, Nankai University, Tianjin 300071, China)

  • YANG Jiayu

    (School of Economics, Nankai University, Tianjin 300071, China)

Abstract

Using China's panel data of 30 provinces during 1990–2003, this paper attempts to explore a possible link between financial development and China's foreign trade. Four indicators are used to identify the role of financial development, which capture both the scale and efficiency feature of China's regional financial development. The effects of other variables are also investigated, including traditional factor endowments, foreign direct investment, infrastructure and institutional quality, etc. In general, the estimation results suggest that financial development has a quantitatively large and robust effect on China's manufactured goods trade, among which the financial efficiency indicators play a more significant role in promoting manufactured goods trade than those scale indicators. Sensitivity estimations show that the effect of financial development on China's total trade essentially differs from that on trade in manufactured goods.

Suggested Citation

  • BAO Qun & YANG Jiayu, 2007. "Does fi nancial development promote international trade? —Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 2(4), pages 532-557, December.
    • Handle: RePEc:fec:journl:v:2:y:2007:i:4:p:532-557
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-007-0028-7
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    More about this item

    Keywords

    financial development; international trade; manufactured goods; panel data;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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