Does Access to Finance Facilitates the Firm’s Ability to Export? Experience from AsiaPacific Countries
Financial development plays an important role in the structure of the trade balance and promoting economic development. Trade literature suggests that differences in economies’ endowments of labour, land, physical capital and technology explain the dynamics and patterns of international trade flows. More recent literature argues that it is the heterogeneity in productivity of firms which mainly accounts for the decision and survival in the international markets. Given the growing importance of Global Value Chains and Regional Production Networks in the emerging economies, financial development is essential to support credit facilities for the traders and provide hassle free transactions. In this context, this study attempts to examine the impact of access to finance on firms’ export decisions in the Asia-Pacific countries. In particular, we have studied whether financial development and institutional quality that support financial access promote international trade. The study found that access to finance plays a significant role in promoting firm’s ability to export. Unlike institutional quality, financial development indicators positively interact with access to finance to promote firm’s ability to export. The study also found that infrastructure bottlenecks negatively affect firms’ export decisions.