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Does Financial Development Lead to Trade Liberalization?

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  • Svaleryd, Helena

    (Dept. of Economics, Stockholm University)

  • Vlachos, Jonas

    (Department of Economics, Stockholm School of Economics)

Abstract

It has long been argued that trade restrictions can be motivated by insurance considerations in the absence of full risk diversification. Recent theoretical research suggests that markets for risk can alleviate resistance to reform and protectionist lobby group pressure. We empirically address the hypothesis that institutions reducing risk can facilitate liberal trade policy. Our results reveal a robust positive relationship between openness to trade and the development of domestic and international financial markets.

Suggested Citation

  • Svaleryd, Helena & Vlachos, Jonas, 2000. "Does Financial Development Lead to Trade Liberalization?," Research Papers in Economics 2000:11, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2000_0011
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    2. Feal-Zubimendi, Soledad, 2009. "Financial Development and Trade Openness: a Survey," MPRA Paper 63341, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial markets; Trade policy; Panel data;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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