Interactions Between Financial Development And Trade Openness

Dong-Hyeon Kim, Shu Chin Lin, Yu Bo Suen

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper empirically investigates the interaction between financial development and trade openness through simultaneous-equation systems. The identification and estimation of the systems rely on the methodology of identification through heteroskedasticity proposed by Rigobon (2003). Using a panel consisting of 70 countries over the period 1960-2007, we find a two-way causal relationship between financial development and trade openness. A better-developed financial sector induces higher openness to trade, while higher openness in goods market stymies financial development. And such findings hold well for low-income, high-inflation, or low-governance countries.

Original languageEnglish
Pages (from-to)567-588
Number of pages22
JournalScottish Journal of Political Economy
Volume58
Issue number4
DOIs
Publication statusPublished - 2011 Sep 1
Externally publishedYes

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ASJC Scopus subject areas

  • Economics and Econometrics
  • Sociology and Political Science

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