The Empirical Study For The Impact Of Financial Development On The International Trade In China

Dr. Thorsten Beck established a mathematical model of financial development in 2002 to study the effect on international trade and reached a conclusion that financial development had a positive influence on the international trade from the result that financial development affected the comparative advantage of manufacturing industries and lead to a further influence on international trade.Based on the research of related literatures, we expect to test and verify the conclusion by using domestic data to find the degree of this impact. The research of this problem follows two aspects:firstly, it is based on the national time series, and secondly, we use panel data to analyze area differences. The study will use the index of Financial Market, and the index of Financial Deepening as well as the index of Financial Intermediaries to compose the Financial Development indices. It will also use the Manufactured Exports/Total Exports, and the Trade Specialization Coefficient as well as the ratio of Total Export-import Volume/GDP as the International Trade indices. FDI, R&D will be the other variables in this model.In the next sector, a quantitative study is conducted on national time series by utilizing cointegration method, and constructing a state space model as well. In order to find out whether the impact of financial development on the international trade is more obvious in more develop-ed areas than other regions, a horizontal comparison is applied through using constructing a Panel Data model.The conclusion of this study:(1) Empirical results show that:the financial development has a long-term positive impact on foreign trade growth. (2) There is a long-run cointegration relationship among financial development indices and international trade indices, and financial development has a significant contribution to international trade. (3) State space model indicates that financial deepening and financial intermediaries have an insignificant fluctuation of the impact on the international trade than financial market. (4) The influence of financial development towards international trade among regions is asymmetric, and the influence coefficient of eastern region in China is higher than central and western areas.