Financial system architecture and the patterns of international trade

Emmanuel Amissah, Spiros Bougheas*, Fabrice Defever, Rod Falvey

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)


Countries differ in the extent to which their financial systems rely on banks or on financial markets. We offer a model featuring a complex relationship between countries’ financial system architecture and their comparative advantage. Countries with capital markets that are relatively more efficient than their banking systems gain comparative advantage in sectors with strong dependence on market finance. Moreover, countries specializing in sectors that depend on market finance develop their capital markets more than their banking systems. To empirically investigate these links, we construct a measure of sector bank dependence and establish a bi-directional relationship between countries’ comparative advantage and their financial systems architecture.

Original languageEnglish
Article number103751
JournalEuropean Economic Review
Publication statusPublished - Jul 2021


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