Trade Openness and Financial Development in the New EU Member States: Evidence from a Granger Panel Bootstrap Causality Test

Marta Wajda-Lichy, Paweł Kawa, Kamil Fijorek and Sabina Denkowska

Eastern European Economics, 2020, vol. 58, issue 3, 242-263

Abstract: The goal of this paper is to investigate the causality between trade openness and financial development in 11 new member states in the European Union. We employ a Granger bootstrap panel approach based on seemingly unrelated regressions, which accounts for cross-sectional dependence and slope heterogeneity among the countries in the panel. The main findings are as follows. First, the test results of the finance-trade nexus are country specific. Second, statistically significant causality is found from trade to finance in eight countries (Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovenia). As the regression coefficients are predominantly negative, the demand-following hypothesis on the finance-trade nexus is not supported in the majority of the countries. Third, finance is found to be a statistically significant Granger cause of trade in six countries (Croatia, Estonia, Latvia, Lithuania, Poland, and the Slovakia), and in four of them (the smaller ones: Croatia, Estonia, Latvia, Lithuania), the regression coefficients take positive signs, which support the supply-leading hypothesis.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1080/00128775.2019.1701498 (text/html)
Access to full text is restricted to subscribers.

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:mes:eaeuec:v:58:y:2020:i:3:p:242-263

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MEEE20

DOI: 10.1080/00128775.2019.1701498

Access Statistics for this article

More articles in Eastern European Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().