Does External Trade Promote Financial Development?

40 Pages Posted: 17 Aug 2005

See all articles by Yongfu Huang

Yongfu Huang


Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Date Written: July 2005


Several recent papers have argued that trade and financial development may be linked, either for political economy reasons, or because foreign competition and exposure to shocks lead to changes in the demand for external finance. In this paper, we use the cross-country and time-series variation in openness to study the relationship between trade and finance in more detail. Our results suggest that increases in goods market openness are typically followed by sustained increases in financial depth.

Keywords: Openness, trade, financial development

JEL Classification: F13, O16

Suggested Citation

Huang, Yongfu and Temple, Jonathan R.W., Does External Trade Promote Financial Development? (July 2005). CEPR Discussion Paper No. 5150. Available at SSRN:

Yongfu Huang

UNU-WIDER ( email )

Katajanokanlaituri 6 B
Heksinki, FI-00160


Jonathan R.W. Temple (Contact Author)

Centre for Economic Policy Research (CEPR)

United Kingdom

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