Unveiling the Impact of Financial Development and Exchange Rate on Foreign Trade Dynamics in the Eagles (1996-2021)

This study examines the relationship between financial development, exchange rates, and foreign trade in emerging and growth-leading countries (EAGLEs) over the period 1996--2021. Financial fluctuations and exchange rate volatility can be more dramatic and have a more direct impact on the foreign trade of EAGLE countries (Brazil, China, India, Indonesia, Korea, Mexico, Russia, and Türkiye) compared to developed countries. Employing sophisticated panel data techniques, such as robust error corrections and second-generation estimators, we examine how trade flows are influenced by exchange rate dynamics and various aspects of financial development, such as efficiency, depth, and accessibility.According to the findings, changes in exchange rates and financial development indicators such as financial access and efficiency have a major positive impact on imports and exports, while foreign trade is negatively impacted by financial depth, which is only statistically significant for exports. These results highlight the dual function of financial systems: excessive financial depth may take resources away from global markets, but increased accessibility and efficiency promote trade integration.Overall, the results underline the importance of stable exchange rate policies and well-structured financial development strategies for sustaining trade-driven growth in emerging economies. According to the results, policymakers can increase the resilience of EAGLE economies and promote long-term competitiveness in foreign trade by improving financial accessibility and efficiency along with exchange rate stabilization.