TITLE:
Capital Flows, Trade and the Role of the Financial System
AUTHORS:
Emmanuel Amissah
KEYWORDS:
Financial Development, Trade Liberalisation, Capital Flows
JOURNAL NAME:
Modern Economy,
Vol.9 No.9,
September
28,
2018
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.