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Financial development and international trade : is there a link?, Volume 1
 
Author:Beck, Thorsten; Collection Title:Policy, Research working paper ; no. WPS 2608
Country:World; Date Stored:2001/06/15
Document Date:2001/05/31Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:Finance
Region:The World RegionReport Number:WPS2608
Sub Sectors:Other FinanceSubTopics:Environmental Economics & Policies; Economic Theory & Research; Payment Systems & Infrastructure; Trade Policy; Banks & Banking Reform; Free Trade; Inequality
Volume No:1  

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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