Evaluating the Nexus Between Political Economy of Financialization and Trade Integration: New Empirical Evidence from Emerging and Developing Countries

Abstract

Financialization and trade integration are well-known synchronous terms in the literature on developed economies and their participation in the growing well-being of these nations. The emerging and developing world is trying to catch up to the developed countries by deregulating their economies to reap the benefits of both financialization and trade integration. The study's contribution is twofold in the literature on financialization and trade integration (GVCs) in emerging and developing countries, providing empirical evidence for the link between the two, using the Generalized Method of Moments (GMM) approach on a group of developing and emerging nations between 1995 and 2020. The findings indicate a robust positive link between trade integration and financialization. The macroprudential policy variable is highly significant, proving the right policy choice to tackle the financial sector in emerging and developing countries.