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Does financial integration drive export diversification? Evidence from a cross-country analysis

Bhushan Praveen Jangam (Department of Liberal Arts, Indian Institute of Technology Hyderabad, Hyderabad, India)
Vaseem Akram (Department of Liberal Arts, Indian Institute of Technology Hyderabad, Hyderabad, India)

Journal of Financial Economic Policy

ISSN: 1757-6385

Article publication date: 21 April 2020

Issue publication date: 21 January 2021

Abstract

Purpose

The purpose of this paper is to examine the nexus between financial integration and export diversification.

Design/methodology/approach

The authors consider 96 economies spanning over the period 1995-2014. To provide broader insights, the authors categorize 96 economies into developed, developing, high and low diversified panels. Both volume and equity-based measures of financial integration are used. The generalized method of moments (GMM) method is used to analyze the link between financial integration and export diversification.

Findings

The results derived from GMM indicate that financial integration is a vital factor of export diversification. Further, the findings reveal similar conclusions for developed, developing, high and low diversified panels.

Research limitations/implications

The outcome of this study suggests that promoting the financial integration of markets by lowering the restrictions on capital inflows helps countries to lower the risk and diversify their exports.

Originality/value

Though there exists enormous literature on export diversification, the nexus between financial integration and export diversification is limited. The present study bridges this research gap.

Keywords

Acknowledgements

The authors gratefully thank the editor and anonymous referee for providing valuable suggestions, which improved this paper substantially. The authors also thank Professor Badri Narayan Rath for the all the support and suggestions. The views expressed in the paper does not reflect the views of acknowledged individuals or organization. All errors are own.

Citation

Jangam, B.P. and Akram, V. (2021), "Does financial integration drive export diversification? Evidence from a cross-country analysis", Journal of Financial Economic Policy, Vol. 13 No. 1, pp. 45-61. https://doi.org/10.1108/JFEP-06-2019-0110

Publisher

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Emerald Publishing Limited

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