The Short-Run and Long-Run Effects of Trade Openness on Financial Development: Some Panel Evidence for Europe

This paper analyses the short- and long-run effects of trade openness on financial development in a panel including data 35 European countries over period 2001-2019. For this purpose, it uses PMG (pooled mean group) estimator for dynamic panels developed by Pesaran et al. (1999). The results differ depending income, governance level considered. In particular, appears that middle-income tends to strengthen long run but have an adverse effect short run. By contrast, case high-income with better institutions higher development, there is positive significant impact Some policy implications these findings are drawn.