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Title: The short-run and long-run effects of trade openness on financial development: some panel evidence for Europe
Authors: Caporale, GM
Sova, AD
Sova, R
Keywords: dynamic panel models;financial development;gravity models;long run and short run;PMG estimator;trade openness
Issue Date: 19-Apr-2022
Publisher: Wiley
Citation: Caporale, G.M., Sova, A.D. and Sova, R. (2022) 'The short-run and long-run effects of trade openness on financial development: Some panel evidence for Europe', International Journal of Finance and Economics, 0 (in press), pp.1-11 (11). doi: 10.1002/ijfe.2626.
Abstract: Copyright © 2022 The Authors. This paper analyses the short- and long-run effects of trade openness on financial development in a panel including data on 35 European countries over the period 2001–2019. For this purpose, it uses the pooled mean group (PMG) estimator for dynamic panels developed by Pesaran et al. (Journal of the American Statistical Association, 1999;94:621). The results differ depending on the income, governance and financial development level of the countries considered. In particular, it appears that in the middle-income countries trade openness tends to strengthen financial development in the long run but to have an adverse effect in the short run. By contrast, in the case of high-income countries with better institutions and a higher level of financial development, there is a positive and significant impact in the short run. Some policy implications of these findings are drawn.
Description: Data Availability Statement: The data that support the findings of this study are available from the corresponding author upon reasonable request.
ORCID: Guglielmo Maria Caporale:
ISSN: 1076-9307
Appears in Collections:Dept of Economics and Finance Research Papers

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