Does fi nancial development promote international trade? —Evidence from China

Qun Bao () and Jiayu Yang
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Qun Bao: School of Economics, Nankai University, Tianjin 300071, China
Jiayu Yang: School of Economics, Nankai University, Tianjin 300071, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2007, vol. 2, issue 4, 532-557

Abstract: Using China's panel data of 30 provinces during 1990–2003, this paper attempts to explore a possible link between financial development and China's foreign trade. Four indicators are used to identify the role of financial development, which capture both the scale and efficiency feature of China's regional financial development. The effects of other variables are also investigated, including traditional factor endowments, foreign direct investment, infrastructure and institutional quality, etc. In general, the estimation results suggest that financial development has a quantitatively large and robust effect on China's manufactured goods trade, among which the financial efficiency indicators play a more significant role in promoting manufactured goods trade than those scale indicators. Sensitivity estimations show that the effect of financial development on China's total trade essentially differs from that on trade in manufactured goods.

Keywords: financial development; international trade; manufactured goods; panel data (search for similar items in EconPapers)
JEL-codes: C23 F14 G20 O16 (search for similar items in EconPapers)
Date: 2007
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