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Financial Development and International Trade: Regional and Sectoral Analysis

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  • Susanto, Dwi
  • Rosson, C. Parr, III
  • Costa, Rafael F.

Abstract

Financial development has been argued as a potential source of comparative advantage and its relationships with trade has been theoretically developed. This theory posits that countries that are well financially developed should experience greater volumes of international trade. We empirically investigate the effects of financial development on trade of both agricultural and manufactured products. The results show a positive impact of financial development on bilateral trade flows for the manufacturing sector, which enjoys a greater impact than the agricultural sector. The impacts differ across regions. In most cases, developing countries (Asia, Latin America, MENA and SSA) experience greater impacts of financial development on exports in both agriculture and manufacturing sectors than do advanced countries.

Suggested Citation

  • Susanto, Dwi & Rosson, C. Parr, III & Costa, Rafael F., 2011. "Financial Development and International Trade: Regional and Sectoral Analysis," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 102647, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea11:102647
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    File URL: http://purl.umn.edu/102647
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    References listed on IDEAS

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    1. Henri L. F. de Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, February.
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    Keywords

    agricultural sector; comparative advantage; financial development; international trade; manufacturing sector; International Development; International Relations/Trade;

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