Financial Development and Trade Openness: a Survey

This paper provides a survey of the theoretical and empirical literature on financial development and its impact on the level of openness and the pattern of international trade. Financial development may be more important in promoting certain industries that requires large amounts of external finance, and therefore stimulates the economic growth. Despite the widespread view that financial development will increase the level of trade, that effect is ambiguous and there is no total consensus on either the direction or the size of the financial development – openness relationshi