The Effect of Financial Development, Tariff, and RTA on Exports: A Structural Gravity Analysis

Syed Nazrul Islam (), Md. Shariful Islam (), Md. Rayhanul Islam () and Md. Ashraful Alam ()
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Syed Nazrul Islam: Bangladesh Bank, Dhaka, Bangladesh, Postal: Bangladesh Bank Head Office Dhaka Bangladesh
Md. Shariful Islam: Bangladesh University of Professionals, Dhaka, Bangladesh, Postal: Department of Economics Bangladesh University of Professionals Bangladesh,
Md. Rayhanul Islam: Bangladesh Bank, Dhaka, Bangladesh, Postal: Bangladesh Bank Head Office Dhaka Bangladesh
Md. Ashraful Alam: Bangladesh Bank, Dhaka, Bangladesh, Postal: Executive Director Bangladesh Bank Head Office Dhaka Bangladesh

Journal of Economic Integration, 2024, vol. 39, issue 1, 107-150

Abstract: This paper examines the effect of financial development (FD), tariffs, and RTA on bilateral exports in a structural gravity framework. Applying high-dimensional fixed effects in OLS and PPML estimation technique in a panel framework covering 169 countries over 2001-2017, this paper finds that FD of both exporters and importers are an important determinant for boosting exports. The EIA has the most trade creation effect than any other form of RTA. Importers' FD has a larger effect on bilateral exports for developed to developed and developed and developing country trade than that of the exporters. The trade between developing to developing countries is positively affected by both exporters' and importers' FD; and negatively to a larger extent by tariff measures. However, in the case of developing and developed country estimation, FD of the exporter country is significantly affecting bilateral trade. Tariffs significantly distort trade, largely between developing and developed countries.

Keywords: financial; development; exports; tariffs; regional; trade; agreement; gravity; model (search for similar items in EconPapers)
JEL-codes: F10 F14 F15 F36 G20 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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