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Finance and international trade : A review of the literature

Author

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  • Anne-Gaël Vaubourg

    (Larefi, Université de Bordeaux)

Abstract

The aim of this paper is to review the literature on the link between nance and international trade. First, export performance is shown to strongly depend on sectors' or fimrs' external nance dependence. More vulnerable rms or sectors export less than others. Moreover, insu cient nancial development and nancial crises harm exports to a greater extent when rms or sectors are dependent on external nance. Second, trade finance plays a key role in nancing trade and provides a powerful transmission channel for fi nancial shocks, which a ect international trade to a greater extent than domestic activities. Moreover there is a reciprocal causality between trade and nance. Finally, financial reforms and trade liberalization appear to be complementary, indicating that trade openness reforms are more e ective in promoting GDP growth when nancial systems are well developed.

Suggested Citation

  • Anne-Gaël Vaubourg, 2014. "Finance and international trade : A review of the literature," Larefi Working Papers 1403, Larefi, Université Bordeaux 4.
    • Handle: RePEc:laf:wpaper:cr1403
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    File URL: http://laf.u-bordeaux4.fr/RePEc/CR_14EFI03.pdf
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    More about this item

    Keywords

    international trade; nancial constraint; nancial development; trade nance; institutional complementarities and substitutabilities;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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