U.s. Trade And Development And Mechanism Of The Interaction Of Financial Development

Theoretical studies in the field of trade-finance nexus didn't start until 20 years ago. So far, most of the theoretical gains are based on the horizontal comparison of panel data, without considering the specific information and external effects of different countries behind the same variables. Thus, one economy's dynamic changes of trade-finance nexus in different stages of development can not be fully reflected. This paper has been made up for the lack of literatures exerting historical analysis to the field for the first time, and selects United States as the object of study.After reviewing the previous literatures, we divide the U.S. economic history into three phases and explore respectively the means and mechanism by which the financial development and trade development can affect each other. Based on the preliminary conclusions of historical analysis, we then use Granger Causality Test to verify the dynamic relationship between financial development and trade development.Combining the results of historical analysis and empirical test together, we draw the conclusion that there do exist bi-directional causal link between financial development and trade development in U.S.. During the 20th century, there is a mutual effect between the growth in manufacturing goods exports and the growth in industry and commercial loans from commercial banks. Although the pushing effect of direct finance from stock markets is not statistically significant, the growth in manufacturing goods exports do accelerate the growth of U.S. stock markets, making the level of financial services upgrade to become a new dynamic comparative advantage. When entering the 21st century, it then stimulates the export of service and the growth of service exports in turn further promotes the direct and indirect finance in the United States. In a word, the financial development and trade development in the U.S. formed a cycle of interaction mechanisms.