Financial Development and International Trade : Is There a Link?
The author explores a possible link between financial development and trade in manufactures. His theoretical model focuses on the role of financial intermediaries in facilitating large-scale, high-return projects. Results show that economies with b...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/05/1121295/financial-development-international-trade-link http://hdl.handle.net/10986/19656 |
| Summary: | The author explores a possible link
between financial development and trade in manufactures. His
theoretical model focuses on the role of financial
intermediaries in facilitating large-scale, high-return
projects. Results show that economies with better developed
financial sectors have a comparative advantage in
manufacturing industries. He provides evidence for this
hypothesis, first proposed by Kletzer and Bardhan (1987),
using a 30-year panel of data for 65 countries. Controlling
for country-specific effects and possible reverse causality,
he shows that financial development exerts a large causal
impact on the level of both exports and the trade balance of
manufactured goods. |
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