International Financial Openness and Manufacturing Productivity: A Services Trade Perspective

Matteo Fiorini, Bernard Hoekman and Dennis Quinn

No 19884, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate the relationship between manufacturing sector productivity and two new measures proxying for barriers to trade in services – restrictions affecting payment for cross-border imports of services and receipts for inward investment. Our services trade policy proxies span the 1965-2018 period, a much longer time span than extant services trade restrictiveness indicators, allowing analysis of the pre-hyper globalization period as well as the post-global financial crisis years that has been the focus of the services trade literature. We find that (i) lower restrictions on services trade and cross-border investment are associated with higher productivity in manufacturing industries that rely more intensely on service inputs; and (ii) that international services payment restrictions and inward investment restrictions are complements: manufacturing productivity is higher when both are simultaneously liberalized. The relationship between international payment restrictions and manufacturing sector performance is heterogenous, varying across time and countries with differing per capita incomes and governance quality.

Keywords: Financial openness; Liberalization; Services input intensity; Services trade policy; Manufacturing productivity (search for similar items in EconPapers)
JEL-codes: F13 F15 F21 F23 L60 L80 (search for similar items in EconPapers)
Date: 2025-01
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