The Effects of Financial Development on Trade Openness: Evidence from Panel Threshold Regression Models
Öz
This paper attempts to re-examine the finance-trade nexus and tests whether higher levels of financial development can reduce trade openness. Using static and dynamic panel threshold regression techniques based on 64 countries over the period of 1970-2014, this study shows that financial development fosters trade openness until a certain level of threshold is achieved and beyond that threshold level, further increases in financial development lead to decline in trade openness. The results of this study suggest that there is a need for developing alternative and new trade financing channels to increase trade openness as well as it provides a strong empirical support for trade-limiting effects of financial development. Hence, this study is possibly encouraging for policy makers to redesign trade enhancing policies.
Anahtar Kelimeler
Financial Development, Trade Openness, Panel Threshold Regression Models
Kaynakça
- Alam, M. S., Selvanathan, E. S. & Hossain, M. (2019). Causal relationship between apparel exports and macroeconomic factors. Applied Economics, 51(25), 2687-2702. doi: 10.1080/00036846.2018.1527447
- Arcand, J. L., Berkes, E. & Panizza, U. (2015). Too much finance?. Journal of Economic Growth. 20(2), 105-148. doi:10.1007/S10887-015-91 15-2
- Arellano, M. & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51. doi: 10.1016/0304-4076(94)01642-D
- Aslam, A., Boz, E., Cerutti, E., Poplawski-Ribeiro, M., & Topalova, P. (2018). The slowdown in global trade: a symptom of a weak recovery?. IMF Economic Review, 66(3), 440-479.
- Beck T., Kunt A. D. & Ross, L. (2000). A new database on financial development and structure’. World Bank Economic Review, 14, 597–605.
- Beck, T. (2002). Financial development and international trade: is there a link?. Journal of International Economics, 57(1), 107-131. doi: 10.1016/S0022-1996(01)00131-3
- Beck, T. (2003). Financial dependence and international trade, The World Bank, WPS2609.
- Beck, T., Degryse, H. & Kneer, C. (2014). Is more finance better? disentangling intermediation and size effects of financial systems. Journal of Financial Stability,10,50-64. doi: 10.1016/j.jfs.2013.03.005
- Becker, B., Chen, J. & Greenberg, D. (2012). Financial development, fixed costs, and international trade. The Review of Corporate Finance Studies, 2(1), 1-28. doi: 10.1093/rcfs/cfs005
- Berman, N. & Héricourt, J. (2008). Financial constraints and the margins of trade: evidence from cross-country firm-level data’. Journal of Development Economics, 93(2), 206-217. doi: 10.1016/j.jdeveco.2009.11.006
