Financial Sector Volatility, Banking Market Structure and Exports


  • We are grateful to Kalina Manova for making publicly available the data used in this paper. We also thank Zhihong Yu (the editor), an anonymous referee, Shiu-Sheng Chen and seminar participants at 2012 Macroeconometric Modelling Workshop in Academic Sinica for very helpful comments and suggestions. The second author would also like to take this opportunity to acknowledge the financial support received from the National Science Council (Taiwan, China) via grant number NSC 97-2410-H-032-002-MY3. Any remaining errors are our own.


This paper assesses the impacts of financial sector volatility and banking market structure on industrial exports. By utilising the specification of Rajan and Zingales (American Economic Review 1998; 88, 559) on the cross-country, cross-industry data from Manova (Journal of International Economics 2008; 76, 33), we find that financial sector volatility, measured as the standard deviation of the growth of private credit, and banking market structure, measured as the share of the three largest banks’ assets in a country, respectively exert significantly negative and positive impacts on industrial exports, particularly for those industries that are more externally financially dependent. The findings are robust to a variety of kinds of sensitivity analysis and thus lend support to the notion that a more stable and concentrated banking system is important to the exports of those industries that rely more on external finance.