The Impact of Trade and Financial Openness on Banks Financial Development in GCC Countries

Abstract

study examines the impact of trade and financial openness on banks' financial development in the Gulf Cooperation Council (GCC) countries. The study used panel dataset of 67 key banks from GCC countries over the period 2009–2018. Banks' financial development is a dependent variable measured by three sets of indicators which are the cost, volume of banks' credit, and banks' risk-taking. Fixed effect regression model shows that both trade openness and financial openness could promote GCC countries' bank's financial development, where both of them affect significantly on the cost and volume of banks' credit variables, but they have insignificant impact on banks' risk-taking. The Authors recommend that simultaneous opening of trade and finance is a more guaranteed way to improved financial development in GCC. This could be happen when the policy makers emphasize trade and financial openness at the core of national development strategies; adopt trade facilitation, logistics, and border management to help their economies to integrate into global value chains through targeted reforms and investments; advice and support implementation of commitments made through trade openness agreements.