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Youssouf Kiendrebeogo
''The effects of financial development on trade performance and the role of institutions''
( 2012, Vol. 32 No.3 )
This paper aims to address the empirical question of whether a country's level of manufacturing trade is affected by its financial sector development and to investigate the role of institutions in this relationship. Countries endowed with better-developed financial systems tend to specialize in industries that rely on external finance in production. This effect is likely to be stronger in countries with high-quality institutions. Using cross-sectional and panel specifications on a sample of 75 countries over the period 1971-2010, we find that financial development strongly and robustly exerts a positive effect on manufacturing exports, even after controlling for the effect of banking crises. Furthermore, institutional quality is found to have a favorable effect on the extent to which finance influences manufacturing trade, suggesting a multiplicity of experiences of the largest exporters of manufactured goods.
Keywords: Financial Development, Manufacturing Exports, Comparative Advantages, Institutional Quality
JEL: F4 - Macroeconomic Aspects of International Trade and Finance: General
E4 - Money and Interest Rates: General
Manuscript Received : Aug 02 2012 Manuscript Accepted : Sep 16 2012

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