Asymmetric Effects of Financial Development on South-South and South-North Trade: Panel Data Evidence from Emerging Markets

Firat Demir and Omar S. Dahi

MPRA Paper from University Library of Munich, Germany

Abstract: Using bilateral trade data in total and technology-and-skill-intensive manufactured goods for 28 developing countries that account for 82% of all developing country manufactures exports between 1978 and 2005, this paper explores the effects of financial development on the pattern of specialization in South-South and South-North trade. The empirical results using dynamic panel regressions and comprehensive sensitivity tests suggest that financial development in the South has an economically and statistically significant positive effect on the share of total and technology-and-skill-intensive manufactures exports in GDP, and total exports in South-South trade. In contrast, no such significant or robust effect of financial development is found in South-North trade. Overall, the positive effect of financial development is found to be asymmetric favoring South-South significantly more than South-North trade. In addition, financial development is found to be increasing technology-and-skill-intensive manufactured goods exports significantly more than total manufactured or merchandise goods exports.

Keywords: South-South and South-North Trade; Financial Development; Industrial Development (search for similar items in EconPapers)
JEL-codes: F14 F15 G10 O16 O50 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: Asymmetric effects of financial development on South-South and South-North trade: Panel data evidence from emerging markets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19177

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