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Abstract In this paper, we examine the impact of trade and financial openness on bank loan pricing. Using data from 35 emerging economies, we first document that higher trade and… Click to show full abstract
Abstract In this paper, we examine the impact of trade and financial openness on bank loan pricing. Using data from 35 emerging economies, we first document that higher trade and financial openness lower interest rates on gross bank loans using country-specific measures for trade and financial openness. We then confirm our findings using firm-specific measures for trade and financial openness and individual loan spread. Exploiting the accession to World Trade Organization (WTO) as a quasi-natural experiment, we observe loan interest rates declined in countries after joining the WTO. Overall, we imply that openness is beneficial for financial development in emerging economies.
Journal Title: Emerging Markets Review
Year Published: 2021
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