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Financial Development and International Trade

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  • Fernando Leibovici

    (Department of Economics, York University, Toronto, Canada)

Abstract

This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to export entry costs and financial frictions, in which industries differ in their dependence on external finance. The model is parametrized to match key features of plant-level data. I find that financial frictions have a large effect on the extent of international trade across industries, but a negligible impact at the aggregate-level. I show that these findings are consistent with estimates from cross-country industry- and aggregate-level data.

Suggested Citation

  • Fernando Leibovici, 2015. "Financial Development and International Trade," Working Papers 2015_3, York University, Department of Economics.
    • Handle: RePEc:yca:wpaper:2015_3
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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