Financial system architecture and the patterns of international trade

Emmanuel Amissah, Spiros Bougheas, Fabrice Defever and Rodney Falvey

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Countries differ on the extent to which their financial system relies on banks or on the financial market. We offer a model featuring a possible two-way relationship between countries' financial system architecture and their comparative advantage. Countries specialising in bank dependent sectors favour the development of the banking sector. Simultaneously, countries with more efficient capital markets develop comparative advantage in sectors with strong dependence on market finance. To empirically investigate our model's predictions, we construct a measure of sector bank dependence and establish a strong relationship between countries' comparative advantage and their financial system architecture.

Keywords: financial systems; trade patterns; banks; direct finance (search for similar items in EconPapers)
JEL-codes: F10 G20 G21 (search for similar items in EconPapers)
Date: 2016-09-20
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https://cep.lse.ac.uk/pubs/download/dp1448.pdf (application/pdf)

Related works:
Journal Article: Financial system architecture and the patterns of international trade (2021)
Working Paper: Financial System Architecture and the Patterns of International Trade (2016)
Working Paper: Financial system architecture and the patterns ofinternational trade (2016)
Working Paper: Financial System Architecture and the Patterns of International Trade (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1448

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