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

Author

Listed:
  • Islam, Syed Nazrul

    (Bangladesh Bank, Dhaka, Bangladesh)

  • Islam, Md. Shariful

    (Bangladesh University of Professionals, Dhaka, Bangladesh)

  • Islam, Md. Rayhanul

    (Bangladesh Bank, Dhaka, Bangladesh)

  • Alam, Md. Ashraful

    (Bangladesh Bank, Dhaka, Bangladesh)

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.

Suggested Citation

  • Islam, Syed Nazrul & Islam, Md. Shariful & Islam, Md. Rayhanul & Alam, Md. Ashraful, 2024. "The Effect of Financial Development, Tariff, and RTA on Exports: A Structural Gravity Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 39(1), pages 107-150.
    • Handle: RePEc:ris:integr:0896
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    More about this item

    Keywords

    financial; development; exports; tariffs; regional; trade; agreement; gravity; model;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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