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Federal Reserve Bank of St. Louis
Working Papers
Financial Development and International Trade
Fernando Leibovici
Abstract

This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the aggregate-level. These findings are consistent with estimates from cross-country industry-level and aggregate data.


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Fernando Leibovici, Financial Development and International Trade, Federal Reserve Bank of St. Louis, Working Papers 2018-15, 01 Aug 2018.
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DOI: 10.20955/wp.2018.015
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