Financial development and comparative advantage: the effect of financial development on manufacturing export in Africa

Abstract

The aim of this paper is to assess the effect of financial development on manufacturing exportin Africa in 30 countries from 2000 to 2021, accounting for endogeneity of variables using anew novel xtdpdgmm command that implements two-step system GMM (Generalised Methodof Moment) estimators. According to the empirical results, financial development significantlyinfluences the manufactured export having a negative sign and pointing out that financial sectordevelopment lowers African manufacturing export. Designing policy frameworks thatencourage export, promote industrial development, and create better environment for long-termsustainable growth should redirect the financial sector so that that sector is veritable mean toshift economic structure toward manufacturing development.