Capital Flows, Trade and the Role of the Financial System - Modern Economy

ME > Vol.9 No.9, September 2018

Capital Flows, Trade and the Role of the Financial System ()

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Download as PDF (Size: 424KB) PP. 1592-1617

DOI: 10.4236/me.2018.99099 1,145 Downloads 2,652 Views Citations

Author(s)

Emmanuel Amissah

Affiliation(s)

Nottingham Trent University, Nottingham, UK.

ABSTRACT

In this study, we examine the crucial role played by financial development in the relationship between trade and capital flows. We examine this relationship for 130 countries from 1980 to 2005 for different types of capital flows. We show that the relationship depends on the type of capital flows and the level of financial development. We observe a positive interaction between trade liberalisation and financial development for portfolio flows. In the case of FDI (Foreign Direct Investment), we observe an insignificant relationship. The FDI flows bypass the financial system as it flows into such countries because of other factors as side the level of the financial development.

KEYWORDS

Financial Development, Trade Liberalisation, Capital Flows

Share and Cite:

Amissah, E. (2018) Capital Flows, Trade and the Role of the Financial System. Modern Economy, 9, 1592-1617. doi: 10.4236/me.2018.99099.

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