The goal of this paper is to investigate the causality between trade openness and financial development in 11 new member states in the European Union. We employ a Granger bootstrap panel approach based on seemingly unrelated regressions, which accounts for cross-sectional dependence and slope heterogeneity among the countries in the panel. The main findings are as follows. First, the test results of the finance-trade nexus are country specific. Second, statistically significant causality is found from trade to finance in eight countries (Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovenia). As the regression coefficients are predominantly negative, the demand-following hypothesis on the finance-trade nexus is not supported in the majority of the countries. Third, finance is found to be a statistically significant Granger cause of trade in six countries (Croatia, Estonia, Latvia, Lithuania, Poland, and the Slovakia), and in four of them (the smaller ones: Croatia, Estonia, Latvia, Lithuania), the regression coefficients take positive signs, which support the supply-leading hypothesis.

Objective: The objective of the article is to examine direct and indirect channels through which information and communication technology affects exports of services. Research Design & Methods: In this study a linear fixed effects panel regression model with country-specific fixed effects and with Driscoll and Kraay standard errors is fit to the data over the period 2000-2019. The samples cover the data sets for 80 countries, and separately for 44 high-income and 36 low and middle-income economies. Findings: The findings show that the access to traditional and broadband digital connectivity has a positive impact on services exports, revealing a slightly stronger influence of the latter for the advanced economies. Additionally, exports and imports of the ICT goods appear to be complementary to services exports. Implications & Recommendations: The detected dependencies indicate that in a digital era, connectivity infrastructure, as well as international flows of the ICT goods bring about significant effects for services exports. Both findings raise important implications for export-led growth policy that should account for new interdependencies between goods and services, and for further investments in digital infrastructure. Contribution & Value Added: This study contributes to the relevant literature by extending the traditional factor-endowment approach used to explain the impact of information and communication technology on the exports of services. Besides specifying the exports of services as a function of internet market penetration, both a traditional and a broadband one, we consider the exports and the imports of ICT goods as the potential determinants of services exports.

The aim of this paper is to investigate whether financial development and trade openness enhance economic growth in 11 new EU member states. While the overwhelming studies employ a simple measure of finance (credit to GDP ratio or stock market capitalization), we run growth regressions using a new IMF broad-based measure, which covers three dimensions of financial development: depth, access, and efficiency. We use a bootstrap panel-data approach based on seemingly unrelated regression (SUR) systems, which takes into account cross-sectional dependency and slope heterogeneity among countries. Such an approach gives separate regression coefficients for each country. The main findings are as follows: (1) the statistically significant unidirectional Granger causality from finance to economic growth is evidenced in five countries under examination (Bulgaria, Lithuania, Poland, Romania, and Slovenia); (2) trade openness is statistically significant Granger-cause of growth in six new EU member states (Croatia, Latvia, Lithuania, Romania, Slovakia, and Slovenia); (3) the reverse causalities, i.e. running from growth to finance were found in two countries (Hungary and Slovenia), and from growth to trade openness in Croatia. The policy-oriented recommendation is that new EU member states from Central and Eastern Europe may gain pro-growth benefits from further finance and trade development, however, the policy-makers should be aware of possible nonlinearities and conditionality of these relationships.

Trade-Finance Nexus: Was it Distorted in the Aftermath of the Global Financial Crisis?