The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies

Badar Nadeem Ashraf; Ningyu Qian; Yinjie (Victor) Shen

doi:10.1016/j.ememar.2021.100793

The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies

Badar Nadeem Ashraf, Ningyu Qian, Yinjie (Victor) Shen

Finance, Economics, Accounting and Analytics

Research output: Contribution to journal › Article › peer-review

36 Citations (Scopus)

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.

Original language	English
Article number	100793
Journal	Emerging Markets Review
Volume	47
DOIs	https://doi.org/10.1016/j.ememar.2021.100793
Publication status	Published - 2 Jun 2021

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

Bank loan pricing
Emerging markets
Financial openness
Trade openness

Access to Document

10.1016/j.ememar.2021.100793

Cite this

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title = "The impact of trade and financial openness on bank loan pricing: Evidence from emerging economies",

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.",

keywords = "Bank loan pricing, Emerging markets, Financial openness, Trade openness",

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AB - 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.

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KW - Financial openness

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