Does Financial Integration Increase Exports? Evidence from International Industry-Level Data

In this paper, I examine whether financially integrated countries export relatively more in industries that depend heavily on external finance. I consider three different components of financial integration: international portfolio equity investments, foreign direct investments, and external debt. The results show that, of these three components, international portfolio equity investments have the strongest and most robust effect on the sectoral composition of export flows. International portfolio equity investments increase exports relatively more in industries that depend heavily on external sources of finance. I also find that this positive effect on exports disappears when the quality of institutions is low.