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

Youssouf Kiendrebeogo

Economics Bulletin, 2012, vol. 32, issue 3, 2546-2559

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.

Keywords: Financial Development; Manufacturing Exports; Comparative Advantages; Institutional Quality (search for similar items in EconPapers)
JEL-codes: E4 F4 (search for similar items in EconPapers)
Date: 2012-09-16
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The E ffects of Financial Development on Trade Performance and the Role of Institutions (2012)
Working Paper: The Effects of Financial Development on Trade Performance and the Role of Institutions (2012)
Working Paper: The effects of financial development on trade performance and the role of institutions (2012)
Working Paper: The Effects of Financial Development on Trade Performance and the Role of Institutions (2012)
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