Although the link between financial development and trade is well documented, the international trade literature has typically defined a country's 'financial development' in macroeconomic terms, rather than considering within-country channels. This paper shows that the impact of finance on exports depends not only on the extent to which the sector relies on external finance but also on the financial channels available. With a data set of 27 sectors from over 120 countries, I find that financial access and efficiency variables--particularly the geographic penetration of bank branches and the business loan application processes--significantly impact exports. Results also suggest remittances may not substitute for formal financial sector development. Copyright 2011, Oxford University Press.
Cambridge Journal of Regions, Economy and Society is edited by Susan Christopherson, Betsy Donald, Harry Garretsen, Meric Gertler, Amy Glasmeier, Mia Gray, Michael Kitson, Linda Lobao, Ron Martin, Linda McDowell, Jonathan Michie and Peter Tyler