Financial Development, Fixed Costs, and International Trade

2012 ◽  
Vol 2 (1) ◽  
pp. 1-28 ◽  
Author(s):  
Bo Becker ◽  
Jinzhu Chen ◽  
David Greenberg
Keyword(s):  
International Trade ◽  
Exchange Rates ◽  
Product Design ◽  
Financial Development ◽  
Financial System ◽  
Fixed Costs ◽  
Specific Investments ◽  
Trade Dynamics

Exports require significant up-front costs in product design, marketing, and distribution. These are intangible, firm-specific investments that are likely difficult to finance externally. We argue that a developed financial system can therefore facilitate exports. We test this prediction and find support for it. First, financial development is associated with more exports in industries in which fixed costs are high as well as to importers that require high costs. Second, trade dynamics are affected by financial development. In countries with better finance, exports are more sensitive to exchange rates. Finally, we predict and document that countries with more developed finance experience more volatile exports. (JEL F14, F36, G20, G30)

scholarly journals Interaction between Financial Development and Sustainable Development, Evidence from Developing Countries: A Panel Data Study

2016 ◽  
Vol 8 (2) ◽  
pp. 243
Author(s):  
Badri Houda ◽  
Mazigh Jaidane Lamia
Keyword(s):  
Sustainable Development ◽  
Developing Countries ◽  
Panel Data ◽  
Financial Development ◽  
Banking Sector ◽  
Financial System ◽  
Complex Concept ◽  
Life Expectancy At Birth ◽  
Favorable Impression ◽  
Domestic Credit

Sustainable development is a complex concept of the world’s and is an major challenge for all countries. For that reason, some authors have argued the essential role of financial development to stimulate the various pillars of this concept, respectively, the economic pillar, ecological and social. The objective of this paper is to study how the financial system in developing countries contributes to the improvement of sustainable development, focusing particularly on the environmental pillar. Estimations are conducted with a panel data of 20 development countries over the period of 1995-2011 using Econometrics static panel. Our findings show that financial system in developing countries, generally has a favorable impression on Environmental, unfavorable effect for industrial investment and economic growth, but in contrast, in insignificant effect for domestic credit provided by banking sector relative to GDP and Life expectancy at birth, total (years).

Effect of financial development on international trade in Africa: Does measure of finance matter?

2018 ◽  
Vol 27 (8) ◽  
pp. 917-936 ◽  
Author(s):  
Awudu Sare Yakubu ◽  
Anthony Q. Q. Aboagye ◽  
Lord Mensah ◽  
Godfred A. Bokpin
Keyword(s):  
International Trade ◽  
Financial Development

The relationship between financial development and effectiveness of monetary policy: new evidence from ASEAN-3 countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zulkefly Abdul Karim ◽  
Danie Eirieswanty Kamal Basa ◽  
Bakri Abdul Karim
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Financial Development ◽  
Open Economy ◽  
Banking Sector ◽  
Financial System ◽  
The Philippines ◽  
Output Growth ◽  
Content Type ◽  
The Relationship

Purpose This paper aims to investigate the relationship between financial development (FD) and monetary policy effectiveness (MPE) on output and inflation in ASEAN-3 countries (Singapore, Malaysia and the Philippines). Design/methodology/approach This study uses an open economy structural vector autoregressive model to generate MPE. Then, an autoregressive distributed lagged (ARDL) model is used to analyze the effect of FD on MPE across countries. Findings The findings revealed that FD plays a different role in MPE across countries. In Malaysia, a more developed financial system tends to reduce the MPE on output, whereas in Singapore, results show that the more developed financial system (stock market capitalization) tends to increase MPE on output. However, in the Philippines, the main results show that the effect of FD (liquid liabilities) upon MPE on output is depending on the policy variable (interest rates or money supply). Originality/value This paper fills this gap by providing the first study of ASEAN-3 countries in examining how effective is a monetary policy in response to the development of the financial market across the country. Second, this paper considers two FD indicators, namely, the banking sector and capital market development in investigating its effect on MPE on output and inflation. Third, the authors construct the MPE in each country using a structural (identified) VAR model by aggregating the response of output growth and inflation rate on monetary policy changes (interest rate and money supply) using impulse–response function. Regarding this, the results of this study provide new empirical evidence and insight into the long debate on the relationship between FD and the MPE.

scholarly journals Customs brokers as intermediaries in international trade

2020 ◽  
Author(s):  
Hege Medin
Keyword(s):  
International Trade ◽  
Panel Data ◽  
Theoretical Models ◽  
Trade Costs ◽  
Econometric Analysis ◽  
Fixed Costs ◽  
Similar Role ◽  
Product Level ◽  
Producer Country

Abstract Recent studies suggest that intermediaries like merchants facilitate international trade by reducing fixed trade costs for producers that trade through them instead of exporting or importing directly. This study argues that customs brokers–a type of intermediary rarely studied in economics before–play a similar role by reducing fixed costs of clearing goods through customs for firms that use them instead of self-declaring. Using panel data of Norwegian trade transactions, the paper shows that the majority of manufacturing producers participating in international trade use such brokers, and that the brokers typically handle large trade values on behalf of several different produces. In an econometric analysis, the author finds that the share of a producer’s market specific trade that is self-declared rather than handled by brokers increases with the traded value. This is in line with predictions from theoretical models on trade intermediaries and holds after controlling for observed as well as unobserved factors at the producer, country and product level. Results are similar for exporting and importing, indicating that brokers facilitate both modes of trade.

scholarly journals Do Financial and Trade Openness Lead to Financial Sector Development in Nigeria?

2016 ◽  
Vol 19 (2) ◽  
pp. 57-68 ◽  
Author(s):  
Abayomi Toyin Onanuga ◽  
Olaronke Toyin Onanuga
Keyword(s):  
Financial Development ◽  
Method Of Moments ◽  
Trade Openness ◽  
Generalized Method Of Moments ◽  
Estimation Method ◽  
Financial System ◽  
Access To Finance ◽  
Global Capital ◽  
Financial Depth ◽  
The World

Abstract With so many countries of the world now open to global capital and trade, this study identifies whether financial and trade openness contribute to the development of Nigeria’s financial system by considering both financial depth and access to finance indicators. To achieve this objective, we applied the Simultaneous Openness Hypothesis as our theoretical framework and the Generalized Method of Moments (GMM) as our estimation method. Our findings reveal that opening trade while neglecting capital (vice versa) may be detrimental to the development of Nigeria financial system. In view of this evidence, we recommend that the simultaneous opening of trade and finance is a more guaranteed way of ensuring improved financial development in Nigeria.

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