DP5150 Does External Trade Promote Financial Development?
|Author(s):||Yongfu Huang, Jonathan Temple|
|Publication Date:||July 2005|
|Keyword(s):||financial development, openness, trade|
|Programme Areas:||Institutions and Economic Performance|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5150|
Several recent papers have argued that trade and financial development may be linked, either for political economy reasons, or because foreign competition and exposure to shocks lead to changes in the demand for external finance. In this paper we use the cross-country and time-series variation in openness to study the relationship between trade and finance in more detail. Our results suggest that increases in goods market openness are typically followed by sustained increases in financial depth.