Document Type : Research Article
Authors
- SHOMURODOV TOKHIR BOYMUROD UGL 1
- KARIMOVA LATOFAT SADULLAYEVNA 2
- OHUNOVA OYGUL USMONJON QIZI 2
- QUZIYEVA GULNOZA RASHIDOVNA 2
- RAHMONOV BEKZOD SHARIBJON UGLI 2
1 Senior lecturer, “Fundamental economics” department, “Economics” faculty of Tashkent State University of Economics (Phd student of School of Economics, Beijing Technology and Business University, China )
2 Assistant teacher, “Fundamental economics” department, “Economics” faculty of Tashkent State University of Economics
Abstract
This paper aims to analyze effect of the financial development level on bilateral trade
flows of China and its trading partners, by the results are escorted with a panel data of 60
countries (china`s trading partners) under the period 2003-2017. The impact of financial
development level on import and export flows of machine electronics, textile and machine
transport products is estimated by employing random effects model, fixed effects model and
Hausman-Taylor estimation methods. The results exhibit that China`s financial development has a
negative effect on import flows, while it has positive and significant impact on exports of China.
Additionally, it was found that financial development level of China`s trading partners is
negatively correlated with textile exports of China. These results reveal that financial development
level correlates differently with import and export flows.
Keywords
- Financial Development
- Bilateral Trade
- random effects
- fixed effects
- textile products
- machine electronics
- machinery
Main Subjects
Aghion, P., and Bolton, P. (1997). A Trickle-Down Theory of Growth and Development with Debt
overhang. Review of economic studies, 64,151-172.
2. Amini, Sharharm, M. S. Delgado, D. Henderson, and C. Parmeter. "Fixed vs Random: The Hausman Test
Four Decades Later." July 30, 2012
3. Amiti, M. and Weinstein, D. E. 2011. Exports and Financial Shocks. The Quarterly Journal of Economics
126 (4): 1841–1877.
4. Anderson, James E. 1979. "A Theoretical Foundation for the Gravity Equation." The American Economic
Review. 69.1:106-116.
5. Assefa, T. A., and A. V. Mollick. 2017. “Financial Development and Economic Growth in Africa.” Journal
of African Business 18 (3): 320–339.
6. Baldwin, R. (1989): "Exporting the Capital Markets: Comparative Advantage and Capital
Market Imperfections", in Audretsch, D., Sleuwaegen, L. and H. Yamawaki (eds.) The Convergence of
International and Domestic Markets, pp.135-152. North-Holland, Amsterdam.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 115
7. Baldwin, R. (1989): "Sunk-Cost Hysteresis", NBER Working Paper 2911.
8. Baldwin, R. and Seghezza, E. (1996): “Trade-induced investment-led growth”, NBER Working Paper
5582.
9. Baltagi, B. H., Demetriades, P., & Law, S. H. (2009). Financial development and openness: Evidence from
panel data. Journal of Development Economics, 89(2), 285–296.
10. Beck, T. (2002): “Financial development and international trade: Is there a link?”, Journal of
International Economics 57(1), pp. 107–131.
11. Beck, T. (2003): “Financial Dependence and International Trade”, Review of International Economics,
May 2003, 11(2), pp. 296-316.
12. Becker, B. and Greenberg, D. (2007): “Financial development, fixed costs and international trade”,
University of Illinois at Urbana-Champaign, Blackrock Inc.
13. Berthelon, M. and C. Freund (2008). On the conservation of distance in international trade. Journal of
International Economics, 75(2), 310-320.
14. Beverelli, C., Keck, A., Larch, M. and Yotov, Y., 2018. “Institutions, trade and development: A
quantitative analysis”. CESifo Working Papers 6920.
15. Boisso, D. and M. Ferrantino (1993). Is the World Getting Smaller? A Gravity Export Model for the
Whole Planet World? Working Papers 9225, Richard Johnson Center Working Paper, Southern Methodist
University.
16. Brun, J. F., Carr`ere, C., Guillaumont, P. and J. de Melo (2005). Has distance died? Evidence from a panel
gravity model. The World Bank Economic Review, 19(1), 99–120.
17. Caballero, J., Candelaria, C. and Hale, G., 2018. “Bank linkages and international trade”. Journal of of
International Economics 115, 30-47.
18. Chaney, T. (2005). Liquidity constrained exporters. Mimeo, available at http://home.uchicago.edu/
tchaney/research.
19. Coe, D. T., Subramanian A., and N.T. Tamirisa (2007). The Missing Globalization Puzzle: Evidence of the
Declining Importance of Distance.
20. Do, Q. T., and Levchenko, A.A. (2004). Trade and Financial development. World Bank working paper
series, 3347.
21. Egger P and M. Pfaffermayr. "The proper panel econometrics specification of the gravity equation: a threeway model with bilateral interaction effects." 28(3): 571-80. Empire Econ 2003
22. Eichengreen, B., and D. A. Irwin (1998). The Role of History in Bilateral Trade Flows. In: Frankel, J.
(1998). The Regionalization of the World Economy , Frankel.
23. Felbermayr, G. J., and W. Kohler (2006). Exploring the Intensive and Extensive Margins of World Trade.
Review of World Economics, 142(4), 642–674.
24. Frankel, J. (1997) Regional trading blocs in the world economic system, Institute for International
Economics, Washington.
25. Frankel. Jeffrey. A., Romer David and Cyrus Teresa (1995) "Trade and Growth in East Asian countries:
Cause and Effect?" National Bureau of Economic Research, Working Paper 5732.
26. Gallup J.L., Sachs J.D. and Mellinger A.D. (1999), “Geography and Economic Development”,
International Regional Science Review, Volume 22, Number 2, pp.179- 232.
27. Garman George and Debora Gilliard (1999) "Economic Integration in The Americas:1975-1992" The
Journal of Applied Business Research. Vol.14 Number 3.
28. Goksel, T. 2012. Financial constraints and international trade patterns. Economic Modelling 29 (6): 2222–
2225.
29. Gross, T., and S. Verani (2013): “Financing Constraints, Firm Dynamics and International Trade,”
Working paper.
30. Hausman, J. A. and Taylor, W. E. (1981) Panel data and unobservable individual effects, Econometrica,
49, 1377–98.
31. Hur, J., M. Raj, and Y. E. Riyanto (2006): “Finance and Trade: A Cross-Country Empirical Analysis on
the Impact of Financial Development and Asset Tangibility on International Trade,” World Development,
34(10), 1728–1741.
32. Ibrahim, M., and P. Alagidede. 2017. “Financial Development, Growth Volatility and Information
Asymmetry in sub-Saharan Africa: Does Law Matter?” South African Journal of Economics 85 (4): 570–
588
33. J.E. Anderson, and E.V. Wincoop, “Gravity with gravitas: a solution to the border puzzle,” American
Economic Review, vol. 93 (1), 2003.
34. Kiendrebeogo, Y. 2012. Understanding the Causal Links between Financial Development and International
Trade. Series Etudes et Documents Du Cerdi, No. 34, Clermont Ferrand: CERDI.
35. Kim, D. H., Lin, S. C. and Suen, Y. B. 2010. Dynamic effects of trade openness on financial development.
Economic Modelling 27 (1): 254–261.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 116
36. Kletzer, K., Bardhan, P., 1987. Credit markets and patterns of international trade. Journal of Development
Economics 27, 57–70.
37. Kohn, D., F. Leibovici, and M. Szkup (2014): “Financial Frictions and New Exporter Dynamics,” Working
paper.
38. Korhan K. G., Amina, M. Y. and Taspinara, N. 2015. The Relationship among International Trade,
Financial Development and Economic Growth: The Case of Pakistan. Procedia Economics and Finance 25:
489 – 496
39. Law, S. H., & Demetriades, P. O. (2006). Openness, institutions and financial development. (World
Economy and Finance Research Programme Working Paper No. 0012). Retrieved from
http://www.worldeconomyandfinance.org/working_papers_
publications/working_paper_PDFs/WEF0012.pdf
40. Leamer, E. E. (1993). U.S. manufacturing and an emerging Mexico. The North American Journal of
Economics and Finance, 4(1), 51–89.
41. Levine, R., Loayza, N., Beck, T., 2000. Financial intermediation and economic growth. Causality and
causes. Journal of Monetary Economics 46, 31–77.
42. Levine, R., Zervos, S., 1998. Stock markets, banks, and economic growth. American Economic Review
88, 537–558.
43. Limao, Nuno and Anthony J. Venables (2001), “Infrastructure, Geographical Disadvantage, Transport
Costs and Trade”, World Bank Economic Review 15, pp. 451-479.
44. Manova, K. (2005): "Credit Constraints in Trade: Financial Development and Export Composition",
Harvard University mimeo.
45. Manova, K. (2006): “Credit Constraints, Heterogeneous Firms and International Trade”, Working Paper,
Harvard University.
46. Manova, K. (2013): “Credit Constraints, Heterogeneous Firms, and International Trade,” Review of
Economic Studies, 80, 711–744.
47. Manova, K. and Fritz, F. C. 2015. International trade, multinational activity, and corporate finance. Annual
Review of Economics 7: 119–146.
48. Manova, K., Wei, S-J. and Zhang, Z., 2015. “Firm exports and multinational activity under credit
constraints”. Review of Economics and Statistics 97(3), 574-588.
49. Martinez, Zarzoso. I and F. Nowak. "Augmented Gravity Model: An Empirical Application to Mercosur
European Union Trade Flows. Journal of Applied Economic, 6(2). 2002.
50. Melitz, M. (2003): “The impact of trade on intra-industry reallocations and aggregate industry
productivity”, Econometrica 71(6), pp. 1695–1725.
51. Minetti, R., and S. Zhu (2011): “Credit Constraints and Firm Export: Microeconomic Evidence from
Italy,” Journal of International Economics, 83(2), 1695–1725.
52. Mishkin, F. S. 2009. Globalization and financial development. Journal of Development Economics 89 (2):
164–169.
53. Niepman, F. and Schmidt-Eisenlohr, T., 2017. “International trade, risk and the role of banks”. Journal of
International Economics 107, 111-126.
54. Omran, M. and Bolbol, A. 2003. Foreign direct investment, financial development, and economic growth:
evidence from the Arab countries. Review of Middle East Economics and Finance. 1 (3): 233-251.
55. Piermartini, R. and Yotov, Y., 2016. “Estimating trade policy effects with structural gravity”. WTO Staff
Working Paper ERSD-2016-10.
56. Raballand, G. (2003), “Determinants of the Negative Impact of Being Landlocked on Trade: An Empirical
Investigation Through the Central Asian Case”, Comparative economic studies, Volume 45, Number 4, pp
520-536.
57. Radelet S. and Sachs J.D. (1998), “Shipping Costs, Manufactured Exports, and Economic Growth”,
Mimeo.
58. Rajan, R. G., and L. Zingales (1998): “Financial Dependence and Growth,” American Economic Review,
88(3), 559–586.
59. Rajan, R.G. and Zingales,L. (2003). The Great reversals: the politics of financial development in the 20th
Century. Journal of Financial Economics, 69, 5-50.
60. Ravallion, M. (2004). Pro-Poor Growth: A Primer. World Bank Policy Research Wprking Paper No. 3242,
1-28.
61. Samba, M. C. and Yan, Y. 2009. Financial Development and International Trade in Manufactures: An
Evaluation of the Relation in Some Selected Asian Countries. International Journal of Business and
Management 4 (12): 52-69.
62. Slaveryd, H., and Vlachos, J. (2005). Financial Markets, the Pattern of Industrial specialization and
Comparative Advantage. Evidence from OECD Countries. European Economic Review, 49, 113-144.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 117
63. Soloaga, I. and L. A. Winters (2001). Regionalism in the nineties: what effect on trade? The North
American Journal of Economics and Finance, 12(1).
64. Susanto, D., C., Rosson. P. and Costa, R. 2011. Financial Development and International Trade: Regional
and Sectoral Analysis. Agricultural & Applied Economics Association 2011 AAEA & NAREA Joint
Annual Meeting, Pittsburgh, Pennsylvania.
65. Tinbergen J. (1962) Shaping the world economy: suggestions for an international economic policy,
Twentieth Century Fund, New York.
66. Van der Veer, K., 2015. “The private credit insurance effect on trade”. Journal of Risk and Insurance
82(3), 601-624.
67. Wooldrige, J. H. (2005) Introductory Econometrics: A modern approach, 3rd edn, Thomson SouthWestern, ISBN 0-324-28978-2.
68. Yazdani M, Pirpour H, Evaluating the effect of intraindustry trade on the bilateral trade productivity for
petroleum products of Iran. Journal: Energy Economics(2018) pg. 5-6.
overhang. Review of economic studies, 64,151-172.
2. Amini, Sharharm, M. S. Delgado, D. Henderson, and C. Parmeter. "Fixed vs Random: The Hausman Test
Four Decades Later." July 30, 2012
3. Amiti, M. and Weinstein, D. E. 2011. Exports and Financial Shocks. The Quarterly Journal of Economics
126 (4): 1841–1877.
4. Anderson, James E. 1979. "A Theoretical Foundation for the Gravity Equation." The American Economic
Review. 69.1:106-116.
5. Assefa, T. A., and A. V. Mollick. 2017. “Financial Development and Economic Growth in Africa.” Journal
of African Business 18 (3): 320–339.
6. Baldwin, R. (1989): "Exporting the Capital Markets: Comparative Advantage and Capital
Market Imperfections", in Audretsch, D., Sleuwaegen, L. and H. Yamawaki (eds.) The Convergence of
International and Domestic Markets, pp.135-152. North-Holland, Amsterdam.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 115
7. Baldwin, R. (1989): "Sunk-Cost Hysteresis", NBER Working Paper 2911.
8. Baldwin, R. and Seghezza, E. (1996): “Trade-induced investment-led growth”, NBER Working Paper
5582.
9. Baltagi, B. H., Demetriades, P., & Law, S. H. (2009). Financial development and openness: Evidence from
panel data. Journal of Development Economics, 89(2), 285–296.
10. Beck, T. (2002): “Financial development and international trade: Is there a link?”, Journal of
International Economics 57(1), pp. 107–131.
11. Beck, T. (2003): “Financial Dependence and International Trade”, Review of International Economics,
May 2003, 11(2), pp. 296-316.
12. Becker, B. and Greenberg, D. (2007): “Financial development, fixed costs and international trade”,
University of Illinois at Urbana-Champaign, Blackrock Inc.
13. Berthelon, M. and C. Freund (2008). On the conservation of distance in international trade. Journal of
International Economics, 75(2), 310-320.
14. Beverelli, C., Keck, A., Larch, M. and Yotov, Y., 2018. “Institutions, trade and development: A
quantitative analysis”. CESifo Working Papers 6920.
15. Boisso, D. and M. Ferrantino (1993). Is the World Getting Smaller? A Gravity Export Model for the
Whole Planet World? Working Papers 9225, Richard Johnson Center Working Paper, Southern Methodist
University.
16. Brun, J. F., Carr`ere, C., Guillaumont, P. and J. de Melo (2005). Has distance died? Evidence from a panel
gravity model. The World Bank Economic Review, 19(1), 99–120.
17. Caballero, J., Candelaria, C. and Hale, G., 2018. “Bank linkages and international trade”. Journal of of
International Economics 115, 30-47.
18. Chaney, T. (2005). Liquidity constrained exporters. Mimeo, available at http://home.uchicago.edu/
tchaney/research.
19. Coe, D. T., Subramanian A., and N.T. Tamirisa (2007). The Missing Globalization Puzzle: Evidence of the
Declining Importance of Distance.
20. Do, Q. T., and Levchenko, A.A. (2004). Trade and Financial development. World Bank working paper
series, 3347.
21. Egger P and M. Pfaffermayr. "The proper panel econometrics specification of the gravity equation: a threeway model with bilateral interaction effects." 28(3): 571-80. Empire Econ 2003
22. Eichengreen, B., and D. A. Irwin (1998). The Role of History in Bilateral Trade Flows. In: Frankel, J.
(1998). The Regionalization of the World Economy , Frankel.
23. Felbermayr, G. J., and W. Kohler (2006). Exploring the Intensive and Extensive Margins of World Trade.
Review of World Economics, 142(4), 642–674.
24. Frankel, J. (1997) Regional trading blocs in the world economic system, Institute for International
Economics, Washington.
25. Frankel. Jeffrey. A., Romer David and Cyrus Teresa (1995) "Trade and Growth in East Asian countries:
Cause and Effect?" National Bureau of Economic Research, Working Paper 5732.
26. Gallup J.L., Sachs J.D. and Mellinger A.D. (1999), “Geography and Economic Development”,
International Regional Science Review, Volume 22, Number 2, pp.179- 232.
27. Garman George and Debora Gilliard (1999) "Economic Integration in The Americas:1975-1992" The
Journal of Applied Business Research. Vol.14 Number 3.
28. Goksel, T. 2012. Financial constraints and international trade patterns. Economic Modelling 29 (6): 2222–
2225.
29. Gross, T., and S. Verani (2013): “Financing Constraints, Firm Dynamics and International Trade,”
Working paper.
30. Hausman, J. A. and Taylor, W. E. (1981) Panel data and unobservable individual effects, Econometrica,
49, 1377–98.
31. Hur, J., M. Raj, and Y. E. Riyanto (2006): “Finance and Trade: A Cross-Country Empirical Analysis on
the Impact of Financial Development and Asset Tangibility on International Trade,” World Development,
34(10), 1728–1741.
32. Ibrahim, M., and P. Alagidede. 2017. “Financial Development, Growth Volatility and Information
Asymmetry in sub-Saharan Africa: Does Law Matter?” South African Journal of Economics 85 (4): 570–
588
33. J.E. Anderson, and E.V. Wincoop, “Gravity with gravitas: a solution to the border puzzle,” American
Economic Review, vol. 93 (1), 2003.
34. Kiendrebeogo, Y. 2012. Understanding the Causal Links between Financial Development and International
Trade. Series Etudes et Documents Du Cerdi, No. 34, Clermont Ferrand: CERDI.
35. Kim, D. H., Lin, S. C. and Suen, Y. B. 2010. Dynamic effects of trade openness on financial development.
Economic Modelling 27 (1): 254–261.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 116
36. Kletzer, K., Bardhan, P., 1987. Credit markets and patterns of international trade. Journal of Development
Economics 27, 57–70.
37. Kohn, D., F. Leibovici, and M. Szkup (2014): “Financial Frictions and New Exporter Dynamics,” Working
paper.
38. Korhan K. G., Amina, M. Y. and Taspinara, N. 2015. The Relationship among International Trade,
Financial Development and Economic Growth: The Case of Pakistan. Procedia Economics and Finance 25:
489 – 496
39. Law, S. H., & Demetriades, P. O. (2006). Openness, institutions and financial development. (World
Economy and Finance Research Programme Working Paper No. 0012). Retrieved from
http://www.worldeconomyandfinance.org/working_papers_
publications/working_paper_PDFs/WEF0012.pdf
40. Leamer, E. E. (1993). U.S. manufacturing and an emerging Mexico. The North American Journal of
Economics and Finance, 4(1), 51–89.
41. Levine, R., Loayza, N., Beck, T., 2000. Financial intermediation and economic growth. Causality and
causes. Journal of Monetary Economics 46, 31–77.
42. Levine, R., Zervos, S., 1998. Stock markets, banks, and economic growth. American Economic Review
88, 537–558.
43. Limao, Nuno and Anthony J. Venables (2001), “Infrastructure, Geographical Disadvantage, Transport
Costs and Trade”, World Bank Economic Review 15, pp. 451-479.
44. Manova, K. (2005): "Credit Constraints in Trade: Financial Development and Export Composition",
Harvard University mimeo.
45. Manova, K. (2006): “Credit Constraints, Heterogeneous Firms and International Trade”, Working Paper,
Harvard University.
46. Manova, K. (2013): “Credit Constraints, Heterogeneous Firms, and International Trade,” Review of
Economic Studies, 80, 711–744.
47. Manova, K. and Fritz, F. C. 2015. International trade, multinational activity, and corporate finance. Annual
Review of Economics 7: 119–146.
48. Manova, K., Wei, S-J. and Zhang, Z., 2015. “Firm exports and multinational activity under credit
constraints”. Review of Economics and Statistics 97(3), 574-588.
49. Martinez, Zarzoso. I and F. Nowak. "Augmented Gravity Model: An Empirical Application to Mercosur
European Union Trade Flows. Journal of Applied Economic, 6(2). 2002.
50. Melitz, M. (2003): “The impact of trade on intra-industry reallocations and aggregate industry
productivity”, Econometrica 71(6), pp. 1695–1725.
51. Minetti, R., and S. Zhu (2011): “Credit Constraints and Firm Export: Microeconomic Evidence from
Italy,” Journal of International Economics, 83(2), 1695–1725.
52. Mishkin, F. S. 2009. Globalization and financial development. Journal of Development Economics 89 (2):
164–169.
53. Niepman, F. and Schmidt-Eisenlohr, T., 2017. “International trade, risk and the role of banks”. Journal of
International Economics 107, 111-126.
54. Omran, M. and Bolbol, A. 2003. Foreign direct investment, financial development, and economic growth:
evidence from the Arab countries. Review of Middle East Economics and Finance. 1 (3): 233-251.
55. Piermartini, R. and Yotov, Y., 2016. “Estimating trade policy effects with structural gravity”. WTO Staff
Working Paper ERSD-2016-10.
56. Raballand, G. (2003), “Determinants of the Negative Impact of Being Landlocked on Trade: An Empirical
Investigation Through the Central Asian Case”, Comparative economic studies, Volume 45, Number 4, pp
520-536.
57. Radelet S. and Sachs J.D. (1998), “Shipping Costs, Manufactured Exports, and Economic Growth”,
Mimeo.
58. Rajan, R. G., and L. Zingales (1998): “Financial Dependence and Growth,” American Economic Review,
88(3), 559–586.
59. Rajan, R.G. and Zingales,L. (2003). The Great reversals: the politics of financial development in the 20th
Century. Journal of Financial Economics, 69, 5-50.
60. Ravallion, M. (2004). Pro-Poor Growth: A Primer. World Bank Policy Research Wprking Paper No. 3242,
1-28.
61. Samba, M. C. and Yan, Y. 2009. Financial Development and International Trade in Manufactures: An
Evaluation of the Relation in Some Selected Asian Countries. International Journal of Business and
Management 4 (12): 52-69.
62. Slaveryd, H., and Vlachos, J. (2005). Financial Markets, the Pattern of Industrial specialization and
Comparative Advantage. Evidence from OECD Countries. European Economic Review, 49, 113-144.
Shomurodov Tokhir Boymurod Ugli et al / An empirical analysis on financial development and bilateral
trade flow nexus.
Journal of Contemporary Issues in Business and Government | Vol 27, Issue 3, 2021 117
63. Soloaga, I. and L. A. Winters (2001). Regionalism in the nineties: what effect on trade? The North
American Journal of Economics and Finance, 12(1).
64. Susanto, D., C., Rosson. P. and Costa, R. 2011. Financial Development and International Trade: Regional
and Sectoral Analysis. Agricultural & Applied Economics Association 2011 AAEA & NAREA Joint
Annual Meeting, Pittsburgh, Pennsylvania.
65. Tinbergen J. (1962) Shaping the world economy: suggestions for an international economic policy,
Twentieth Century Fund, New York.
66. Van der Veer, K., 2015. “The private credit insurance effect on trade”. Journal of Risk and Insurance
82(3), 601-624.
67. Wooldrige, J. H. (2005) Introductory Econometrics: A modern approach, 3rd edn, Thomson SouthWestern, ISBN 0-324-28978-2.
68. Yazdani M, Pirpour H, Evaluating the effect of intraindustry trade on the bilateral trade productivity for
petroleum products of Iran. Journal: Energy Economics(2018) pg. 5-6.
)