Trade openness, financial openness, and financial development in China

Zhang, Chengsi; Zhu, Yueteng; Lü, Zhe

doi:10.1016/j.jimonfin.2015.07.010

Cited by 128 publications

(71 citation statements)

References 35 publications

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“…The trade intensity ratio (T S) constructed as the sum of exports and imports to nominal gross domestic product (GDP ) (i.e. X + M/GDP , where X, M and GDP denote exports, imports and gross domestic product, respectively) is the widely used outcome-oriented measure of openness (Chang et al, 2009;Zhang et al, 2015).…”

Section: Measuring Trade Opennessmentioning

confidence: 99%

Short and long-term impact of trade openness on financial development in Sub-Saharan Africa

Ho¹,

Iyke²

2021

The Journal of Developing Areas

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We extended a recently proposed index of trade openness to a panel data setting in order to investigate the short-and long-term impact of trade openness on financial development for a panel of 43 sub-Saharan African countries over the period 1996 to 2014. We found that trade openness enhances financial development in the long term. In the short term, however, the effect of openness is not clear but appears to be negative. When we divided the sample into low-and middle-income groups, we found that openness enhances financial development in the former group but detrimentally affects it in the latter group. This suggests a non-linear relationship between financial development and openness. Among other factors that may be relevant in explaining the trade openness-financial development nexus, we examined the role of governance, human capital development, and infrastructural development. We found that governance, human capital development and infrastructure development are critical to financial development, particularly in the long term. Our findings have relevant policy implications, which we elaborate on in this paper.

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Section: Measuring Trade Opennessmentioning

confidence: 99%

Short and long-term impact of trade openness on financial development in Sub-Saharan Africa

Ho¹,

Iyke²

2021

The Journal of Developing Areas

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“…Some studies revealed that both financial and trade openness affect financial development positively (e.g. Law and Demetriades (2006), Law (2007), Baltagi et al (2009), Law (2009, Acikgoz et al (2012), Zhang et al (2015), Onanuga and Onanuga (2016)), while some papers found that only trade or financial openness had positive effect on development of financial sectors (e.g. see Kim et al (2010), Le et al (2016), Muhammad et al (2016)).…”

Section: Literature Reviewmentioning

confidence: 99%

“…On the other side, Niroomand et al (2014) analyzed the interaction between development of financial sector and trade openness in 18 emerging markets during 1980-2011period employing ARDL approach and revealed that financial development had positive impact on trade openness in short and long run. Zhang et al (2015) also researched the interplay between financial sector development and openness in China during 2000-2009 period employing dynamic panel regression and revealed that openness affected the efficiency and competition of financial sector positively, but affected the size of financial sector negatively. So their findings are in favor of SOH.…”

Section: Literature Reviewmentioning

confidence: 99%

Openness and Financial Development in Central and Eastern European Countries

Bayar

Akyüz

Erem

2017

Studies in Business and Economics

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Abstract:Great numbers of countries have made the limitations loose on the transnational goods, services and capital flows and begun to follow a policy of export-oriented growth. Total value of global financial asset flows exceeded the value of global trade over time and financial markets have experienced considerable expansions in almost every country. This paper investigates the interaction between openness and financial development in 9 Central and Eastern European countries during 1996-2014 period employing cointegration test of Westerlund and Edgerton (2007) and causality test of Dumitrescu and Hurlin (2012). We reached that openness affected financial sector development positively in the long term. Furthermore, there was one-way causality from financial openness to financial sector development.

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“…Some economists confirm that financially developed countries trade more (Beck, 2002;Manova, 2013;Becker et al, 2013), whereas others emphasize weak or conditioned causality from finance to trade (Chang, Kaltani, & Loayza, 2009;Menyah, Nazlioglu, & Wolde-Rufael, 2014). There is also evidence of links from international openness to finance, which is conditioned on economic or political institutions (Rajan & Zingales, 2003;Baltagi, Demetriades, & Law, 2009;Bordo & Rousseau, 2012;Zhang, Zhu, & Lu, 2015).…”

Section: Literature Reviewmentioning

confidence: 99%

Trade-Finance Nexus: Was it Distorted in the Aftermath of the Global Financial Crisis?

Wajda-Lichy¹,

Kawa

2018

EBER

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The objective of this article is to examine whether the trade-finance nexus was distorted in the aftermath of the global financial crisis. Research Design & Methods: We estimated OLS regressions between trade and finance for 36 countries. The Quandt-Andrews breakpoint test and Bai-Perron multiple breaking point test were used to test for structural breaks in the trade-finance nexus. Findings: The results show that a structural break in the trade-finance relationship occurred in 2008 in the majority of the examined countries. The structural changes were relatively more often identified in middle-income countries than in high-income ones. This finding confirms our suppositions inferred from the stylized facts that reactions of international trade and financial development in the crisis era differed across the countries depending on their level of development. Implications & Recommendations: Our study partly fills the gap between theory-based approaches to the trade-finance nexus and empirical evidence. It also emphasizes the need of a revision of traditional theoretical arguments, including those referring to the linkages between the financial and the real sides of economy. Contribution & Value Added: Our article contributes to the theoretical discussion in three ways. Firstly, we examine a still bothering question on the relationship between the financial and the real sides of economy. Secondly, while the main strand in the literature deals with finance-growth and trade-growth interactions, we focus directly on the trade-finance linkages. Thirdly, our finding that a break in the trade-finance nexus was more pronounced for the middle-income countries may provide some insight into better understanding of the global financial crisis of 2008 and its consequences. Article type: research article

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Trade openness, financial openness, and financial development in China

Cited by 128 publications

References 35 publications

Short and long-term impact of trade openness on financial development in Sub-Saharan Africa

Short and long-term impact of trade openness on financial development in Sub-Saharan Africa

Openness and Financial Development in Central and Eastern European Countries

Trade-Finance Nexus: Was it Distorted in the Aftermath of the Global Financial Crisis?

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