Demand-following or supply-leading? Trade openness and financial development in China
Abstract
This study explores the causal relationship between financial development and trade openness in China, using the research methodology namely bootstrap Granger full-sample causality test and sub-sample rolling-window estimation. The results reveal that there is a significant bidirectional relationship between financial development and trade openness in China, pointing out the existence of both ‘demand-following’ and ‘supply-leading’ hypotheses. Furthermore, their relationship fits well the fact that China has experienced economic restructuring and structural changes in the past few decades. As financial development improves trade openness robustly, the Chinese policymakers should further increase financial reform to promote trade development.
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There is a bi-directional causality between financial inclusion and economic growth in different countries and regions.
“Several other researchers found a bi-directional causality between financial inclusion and economic growth in different countries and regions, indicating the complementarity of the 'demand-following' and 'supply-leading' hypotheses and encouraging regulators to follow a holistic approach while undertaking a financial reform that promotes economic developments (Chima et al. 2021; Arayssi et al. 201”
From Financial Inclusion and Economic Growth in Sub-Saharan Africa—A Panel ARDL and Granger Non-Causality Approach (2023) · cites this paper as Fan et al. 2018
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References 61 · Cited by 16
- Authors
- Fan, J.-J., Xu, R., Su, C. W., & Shi, Q.-H.
- Affiliations
- Shanghai Jiao Tong University (CN)
- Qilu University of Technology (CN)
- Ocean University of China (CN)
- Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai, China
- Corresponding author
- Xu, Ruzhi
- ORCID
- Venue
- The Journal of International Trade & Economic Development
- Publisher
- Informa UK Limited
- Published
- 2017-11-16
- Volume
- 27
- Issue
- 3
- Pages
- 314-332
- ISSN
- 0963-8199 (ISSN-L)
- 1469-9559
- OpenAlex
- W2768203536
- Cited by
- 16
- References
- 61
- Citations by year
- 2026: 2 · 2025: 1 · 2023: 2 · 2022: 4 · 2021: 4 · 2019: 1 · 2018: 2
- FWCI
- 1.92
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of International Trade & Economic Development (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
- Keywords
- financial development, trade openness, demand-following hypothesis, supply-leading hypothesis, bidirectional causality, financial reform, economic restructuring, China
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