Abstract:

The article analyzes the relationship between financial liberalization and the current account balance. It thus attempts to answer the question of how financial market deregulation affects international trade. There are two main arguments in favor of undertaking this research topic. The first concerns the search for answers to the question of the consequences of financial market deregulation for the real economy. The second concerns the identification of the determinants of permanent trade deficits. The article presents the theoretical channels through which financial liberalization affects trade. The empirical analysis covered 35 countries from 1973 to 2019, primarily OECD countries. As part of the research process, a financial liberalization index covering a wide range of instruments regulating its functioning was used to measure the phenomenon of financial liberalization. The study used comparative analysis and Granger causality analysis (Granger Dumitrescu-Hurlina causality test). Based on the analysis results, it can be concluded that financial liberalization may have a positive impact on the current account balance.