Financial Development, Export Experience and Survival of Trade Relations

In the thesis, I explore the relationship between the financial development of a country and the survival of its trade relations. Moreover, I address the importance of firms’ export experience in a foreign market and investigate how it impacts the financial development effect on export duration in developing countries. Using the export data disaggregated at the five-digit level SITC Rev.2 from 45 countries during the period of 1992-2011, I first show that the greater the financial development, the lower the likelihood that a country experiences export failure. I, also, provide robust evidence that financial development is of particular importance to export duration of manufacturing industries that are more dependent on external funding. Finally, using the data of developing countries, I show that the impact of financial development on trade survival decreases as export experience increases. The result can be explained by the fact that, in developing countries companies which are more experienced in exporting face fewer difficulties in obtaining necessary funding. Hence, such companies cover the costs of production and exporting easier and are less likely to experience export failure.