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Financial Development and International Trade: Regional and Sectoral Analysis

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  • Susanto, Dwi
  • Rosson, C. Parr, III
  • Costa, Rafael F.

Abstract

Financial development has been argued as a potential source of comparative advantage and its relationships with trade has been theoretically developed. This theory posits that countries that are well financially developed should experience greater volumes of international trade. We empirically investigate the effects of financial development on trade of both agricultural and manufactured products. The results show a positive impact of financial development on bilateral trade flows for the manufacturing sector, which enjoys a greater impact than the agricultural sector. The impacts differ across regions. In most cases, developing countries (Asia, Latin America, MENA and SSA) experience greater impacts of financial development on exports in both agriculture and manufacturing sectors than do advanced countries.

Suggested Citation

  • Susanto, Dwi & Rosson, C. Parr, III & Costa, Rafael F., 2011. "Financial Development and International Trade: Regional and Sectoral Analysis," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 102647, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea11:102647
    DOI: 10.22004/ag.econ.102647
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    References listed on IDEAS

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    1. Henri L. F. De Groot & Gert‐Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, February.
    2. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
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    Cited by:

    1. Muhammad Asif Shamim; Syed Tehseen Jawaid; Farooq-E-Azam Cheema, 2019. "How does financial development impact trade openness? Evidence from export performance of Pakistan," South Asian Journal of Management Sciences (SAJMS), Iqra University, Iqra University, vol. 13(1), pages 74-98, Spring.
    2. Imen Mohamed Sghaier, 2020. "Does Financial Development Affect the Economic Growth Gains from Trade Openness?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 666-682, December.
    3. Sebil Olalekan Oshota & Bashir Adelowo Wahab, 2022. "Institutional Quality and Intra-Regional Trade Flows: Evidence from ECOWAS," Journal of African Trade, Springer, vol. 9(1), pages 73-106, December.
    4. Shujaat Naeem Azmi & Shakeb Akhtar, 2023. "Interactions of services export, financial development and growth: evidence from India," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(5), pages 4709-4724, October.
    5. Bilas Vlatka & Bosnjak Mile & Novak Ivan, 2017. "Examining the Relationship between Financial Development and International Trade in Croatia," South East European Journal of Economics and Business, Sciendo, vol. 12(1), pages 80-88, April.

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    Keywords

    International Development; International Relations/Trade;

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