Financial development and exports of manufactured goods in Latin American countries

Using time series data, we test the causality between exports of manufactured goods and financial development in eleven Latin American countries (LACs). This particular relationship is especially important in the context of LACs since export diversification away from resources and agriculture is crucial for growth strategy of these countries. Our results show that in 36% of the countries in our sample, financial development causes manufactured exports and vis-á-vis for the remaining 64%. To understand these differences in causality, we explore a number of related factors. Generally, our results appear to be at odds with the extant literature but are explained when we rely on the particular characteristics of Latin American economies.