Interactions Between Financial Development And Trade Openness

Dong Hyeon Kim, Shu Chin Lin, Yu Bo Suen

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)


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
Issue number4
Publication statusPublished - 2011 Sept
Externally publishedYes

ASJC Scopus subject areas

  • Sociology and Political Science
  • Economics and Econometrics


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