Trade and Financial Development
Trade and Financial Development:

The differences in financial systems between industrial and developing countries are pronounced. It has been observed, both theoretically and empirically, that the differences in countries' financial systems are a source of comparative advantage in trade. Do and Levchenko point out that to the...

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Bibliographische Detailangaben
1. Verfasser: Do, Quy-Toan (VerfasserIn)
Format: Elektronisch E-Book
Sprache:English
Veröffentlicht: Washington, D.C The World Bank 2004
Schlagworte:
Comparative Advantage
Cred Development
Debt Markets
Economic Theory and Research
Economy
Emerging Markets
Equilibrium
Finance and Financial Sector Development
Financial Sector
GDP
Goods
Income
Increasing Returns
Increasing Returns To Scale
International Trade
Macroeconomics and Economic Growth
Private Sector Development
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Zusammenfassung:The differences in financial systems between industrial and developing countries are pronounced. It has been observed, both theoretically and empirically, that the differences in countries' financial systems are a source of comparative advantage in trade. Do and Levchenko point out that to the extent a country's financial development is endogenous, it will in turn be influenced by trade. They build a model in which a country's financial development is an equilibrium outcome of the economy's productive structure: in countries with large financially intensive sectors, financial systems are more developed. When a wealthy and a poor country open to trade, the financially dependent sectors grow in the wealthy country, and so does the financial system. By contrast, as the financially intensive sectors shrink in the poor country, demand for external finance decreases and the domestic financial system deteriorates. The authors test their model using data on financial development for a sample of 77 countries. They find that the main predictions of the model are borne out in the data: trade openness is associated with faster financial development in wealthier countries, and with slower financial development in poorer ones. This paper—a product of the Development Research Group—is part of a larger effort in the group to investigate the relation between finance and trade
Beschreibung:1 Online-Ressource (1 online resource (30 p.))
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