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The effects of financial development on trade performance and the role of institutions

Abstract : This paper aims to address the empirical question of whether a country's level of manufacturing trade is affected by its financial sector development and to investigate the role of institutions in this relationship. Countries endowed with better-developed financial systems tend to specialize in industries that rely on external finance in production. This effect is likely to be stronger in countries with high-quality institutions. Using cross-sectional and panel specifications on a sample of 75 countries over the period 1971-2010, we find that financial development strongly and robustly exerts a positive effect on manufacturing exports, even after controlling for the effect of banking crises. Furthermore, institutional quality is found to have a favorable effect on the extent to which finance influences manufacturing trade, suggesting a multiplicity of experiences of the largest exporters of manufactured goods.
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https://halshs.archives-ouvertes.fr/halshs-00735893
Contributor : Cerdi Etudes & Documents - Publications <>
Submitted on : Thursday, September 27, 2012 - 10:42:29 AM
Last modification on : Tuesday, April 20, 2021 - 10:48:06 AM

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Youssouf Kiendrebeogo. The effects of financial development on trade performance and the role of institutions. Economics Bulletin, Economics Bulletin, 2012, 32 (3), pp.2546-2559. ⟨halshs-00735893⟩

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