Financial Development and Textile Sector Competitiveness

Muhammad Hanif and Sabina Khurram Jafri
Additional contact information
Sabina Khurram Jafri: Muhammad Nadim Hanif (corresponding author) and Sabina Khurram Jafri are with the State Bank of Pakistan, I.I. Chundrigar Road, Karachi-74000, Pakistan. Email: nadeem.hanif@sbp.org.pk and Sabina.Kazmi@sbp.org.pk

South Asia Economic Journal, 2008, vol. 9, issue 1, 141-158

Abstract: Kletzer and Bardhan (1987) argue that countries with a relatively well-developed financial sector have a comparative advantage in industries that rely on external finance. Beck (2002) and Fanelli and Medhora (2002) find that well-developed financial sector translates into a comparative advantage in the production of manufactured goods. There has been no attempt so far to explore the relationship between the financial development and international trade competitiveness in the case of Pakistan. We construct Balassa's Revealed Comparative Advantage (RCA) index for textile sector of Pakistan. Using ratio of credit extended to the textile sector to the total non-government credit of the banking system (Textile Credit Share [TCS]) as proxy for external finance, we estimate long-run relationship and Error Correction Mechanisms (ECM) between RCA index and TCS while controlling for other determinants of the international trade competitiveness of textile sector of Pakistan. In line with the findings of Beck (2002) and Fanelli and Medhora (2002), our results suggest that recourse to external finance has a strong positive impact on the country's textile sector competitiveness both in the short and the long run, even when we control for traditional determinants of competitiveness.

Keywords: JEL: F14; JEL: O16; Financial Development; Competitiveness (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/139156140700900106 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:soueco:v:9:y:2008:i:1:p:141-158

DOI: 10.1177/139156140700900106

Access Statistics for this article

More articles in South Asia Economic Journal from Institute of Policy Studies of Sri Lanka
Bibliographic data for series maintained by SAGE Publications ().