The Mechanism Between Financial Development And International Trade

Financial Development and International trade has been attributed as two greatest issues to development of world for the sake of their contribution to economy growth. However, the significance of the relationship between financial development and international trade has been ignored in the previous literatures. By combining the theory of financial development and international trade, This, dissertation systematically explores the means and mechanism by which the financial development can affect the development of international trade, eventually build up a general framework of international trade and financial development theory. According to the sequence of each stage of financial development, this essay starts from perspective of financial restriction which distorts international trade, which can highlight the contribution of financial development to international trade. The theory points out that the financial development benefits the upgrading of international trade structure, optimizes the international trade model and facilitates freedom of international trade policy. We observed the data both of international trade and financial development from the middle of last century, applied comparative analysis method in order to testify co-relationship between them. Finally, the dissertation specifies out focus on the situation of China. The empirical analysis consistent with the previous theory we have put forward, demonstrating that the financial development is helpful for the development of international trade. However, the regression parameters of financial indexes are not so big. That is no surprise when we observe the fact of financial development in China. Although there have been a considerable development in finance industry, the efficiency problem in financial market still haven't been tackled in China.