Financial System Architecture and the Patterns of International Trade

40 Pages Posted: 25 Jul 2016

See all articles by Emmanuel Bentum Amissah

Emmanuel Bentum Amissah

Nottingham Trent University

Spiros Bougheas

University of Nottingham - School of Economics

Fabrice Defever

University of Nottingham

Rod Falvey

Bond University - Department of Economics

Date Written: June 27, 2016

Abstract

Countries differ on the extent to which their financial system relies on banks or on the financial market. We offer a model featuring a possible two way relationship between countries’ financial system architecture and their comparative advantage. Countries specialising in bank dependent sectors favour the development of the banking sector. Simultaneously, countries with more efficient capital markets develop comparative advantage in sectors with strong dependence on market finance. To empirically investigate our model’s predictions, we construct a measure of sector bank dependence and establish a strong relationship between countries’ comparative advantage and their financial system architecture.

Keywords: financial systems, trade patterns, banks, direct finance

JEL Classification: F100, G200, G210

Suggested Citation

Amissah, Emmanuel Bentum and Bougheas, Spiros and Defever, Fabrice and Falvey, Rod, Financial System Architecture and the Patterns of International Trade (June 27, 2016). CESifo Working Paper Series No. 5960. Available at SSRN: https://ssrn.com/abstract=2814009

Emmanuel Bentum Amissah

Nottingham Trent University ( email )

Burton Street
NG1 4BU Nottingham
United Kingdom
01158484143 (Phone)

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Fabrice Defever

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Rod Falvey

Bond University - Department of Economics ( email )

Bond University - Department of Economics
Gold Coast, Queensland 4229
Australia

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