THE ROLE OF CREDIT CONDITIONS AND LOCAL FINANCIAL DEVELOPMENT ON EXPORT PERFORMANCES: A FOCUS ON THE ITALIAN REGIONS

The present study examines the drivers of Italian exports via an export demand equation augmented with regional and time-varying impacts of local financial development. Financial development has been considered a potential source of comparative advantage and its relationship with trade has been theoretically examined. This theory posits that countries that are well financially developed should experience greater volumes of international trade. We empirically investigate the effects of local financial development on regional trade of manufactured products. To this purpose a fixed effect regression model with Driscoll and Kraay standard errors has been used to account for cross-sectional dependence. The period of analysis goes from 1990 to 2012. The results show that a mix of factors would contribute to lift exports, including financial development, that exerts a positive impact on trade flows.