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Frontiers of Economics in China

Front. Econ. China    2007, Vol. 2 Issue (4) : 532-557     DOI: 10.1007/s11459-007-0028-7
Does fi nancial development promote international trade? —Evidence from China
BAO Qun, YANG Jiayu
School of Economics, Nankai University, Tianjin 300071, China
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Abstract Using China’s panel data of 30 provinces during 1990–2003, this paper attempts to explore a possible link between financial development and China’s foreign trade. Four indicators are used to identify the role of financial development, which capture both the scale and efficiency feature of China’s regional financial development. The effects of other variables are also investigated, including traditional factor endowments, foreign direct investment, infrastructure and institutional quality, etc. In general, the estimation results suggest that financial development has a quantitatively large and robust effect on China’s manufactured goods trade, among which the financial efficiency indicators play a more significant role in promoting manufactured goods trade than those scale indicators. Sensitivity estimations show that the effect of financial development on China’s total trade essentially differs from that on trade in manufactured goods.
Issue Date: 05 December 2007
 Cite this article:   
BAO Qun,YANG Jiayu. Does fi nancial development promote international trade? —Evidence from China[J]. Front. Econ. China, 2007, 2(4): 532-557.
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