Title: Trade Openness, Capital Flows and Financial Development in Developing Economies
Abstract: Abstract This paper examines the impact of trade openness and capital flows on financial development in developing countries using a dynamic panel GMM estimation technique. The empirical results reveal that trade openness and capital flows are statistically significant determinants of financial development. Simultaneous opening of both the trade and capital accounts also appear to have positive impacts on financial development. The evidence also suggests that openness leads to improved financial development through institutional quality and competition channels. However, the institutional channel outperforms competition in ensuring the positive effects of openness on financial market depth in developing countries. Keywords: Financial developmenttrade opennesscapital flowsdynamic panel GMM analysisJEL Classifications: F19G29 Acknowledgements The author thanks the two anonymous referees for their helpful and constructive comments, and Professor Panicos Demetriades from the University of Leicester for such beneficial discussions on an earlier draft. The use of several data sources and their interpretation, as well as any remaining errors is solely the author's responsibility.
Publication Year: 2009
Publication Date: 2009-09-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 81
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