Financial development and the choice of trade partners

Chan, Jackie M.L.; Manova, Kalina

doi:10.1016/j.jdeveco.2015.04.002

Cited by 38 publications

(15 citation statements)

References 35 publications

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“…Corroborating Do and Levchenko findings, Chan and Manova (2015), working on financial development and the choice of trading partners in 78 exporting countries and 27 industries and covering a period of 1985-1995, found that financial development positively determines exporter's destination counts, however, with pecking order destinations conditioned on the country's market size and trading costs. In other words, financially developed countries do have many trading partners.…”

Section: Literature Reviewmentioning

confidence: 79%

An Empirical Investigation of the Relationship between Financial Development and Merchandise Trade in Nigeria

Adeboje

Raifu

Ogbeide³

et al. 2021

Zagreb International Review of Economics and Business

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This study examines the empirical relationship between financial development and merchandise trade in Nigeria using annual data from 1981 to 2014. The empirical analysis is also carried out on the disaggregated components of the trade, that is, merchandise export and import, for robust analysis. Estimation results based on error correction model show that there exists significant long run positive relationship between financial development and export in Nigeria over the period under study. There is need for government to therefore provide enabling environment for financial sector to thrive through sound macroeconomic policies for effective economic diversification through export.

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Section: Literature Reviewmentioning

confidence: 79%

An Empirical Investigation of the Relationship between Financial Development and Merchandise Trade in Nigeria

Adeboje

Raifu

Ogbeide³

et al. 2021

Zagreb International Review of Economics and Business

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“…Another fruitful area for future research concerns the combination of empirical analyses with rigorous theoretical underpinnings that investigate the drivers and channels of the trade‐finance nexus in order to distinguish which of the various theoretical models is supported by the data. These include, among others, approaches that incorporate macroeconomic dynamics, such as a changing industrial structure (Jin, 2012), or models focusing on the role of financial conditions, such as trade finance or financial constraints (Antràs & Foley, 2015; Chan & Manova, 2015).…”

Section: Discussionmentioning

confidence: 99%

Trade and capital flows: Substitutes or complements? An empirical investigation

Belke

Domnick

2021

Rev International Economics

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This paper examines the linkages between the trade of goods and financial assets. Do both flows behave as complements (implying a positive correlation) or as substitutes (negative correlation)? Although a classic topic in international macroeconomics, the empirical evidence has remained relatively scarce so far, in particular for the Euro area where trade and financial imbalance played a prominent role in the build‐up of the European sovereign debt crisis. Consequentially, we use a novel dataset, providing estimates for financial flows and its four main categories for 42 countries and covering the period from 2002 to 2012, to test the so‐called trade‐finance nexus. Since theoretical models stress that both flows might be influencing each other simultaneously, we introduce a novel time‐varying instrumental variable based on capital control restrictions to estimate a causal effect. The results of the gravity regressions support theories that underline the complementarity between exports and capital flows. When testing the trade‐finance nexus for different types of capital flows, the estimated coefficient is most pronounced for foreign direct investment, in line with theories stressing informational frictions. Robustness checks in the form of different estimation methods, alternative proxies for capital flows and sample splits confirm the positive relationship. Interestingly, the trade‐finance nexus does not differ among countries belonging to the EMU, the European Union or among core and peripheral Euro area countries.

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“…Chan & Manova (2013) show that financially more developed countries go further down the pecking order of export destinations in financially more vulnerable sectors, with market size and trade costs determining the destinations' market potential and position in the pecking order.…”

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confidence: 99%

International Trade, Multinational Activity, and Corporate Finance

2015

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An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations, and, as a consequence, influence aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

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Financial development and the choice of trade partners

Cited by 38 publications

References 35 publications

An Empirical Investigation of the Relationship between Financial Development and Merchandise Trade in Nigeria

An Empirical Investigation of the Relationship between Financial Development and Merchandise Trade in Nigeria

Trade and capital flows: Substitutes or complements? An empirical investigation

International Trade, Multinational Activity, and Corporate Finance

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