Working Paper: CEPR ID: DP5846
Authors: Alan M. Taylor; Janine Wilson
Abstract: Do international trade and finance flow together? In theory, trade and finance can be substitutes or complements, so the matter must be resolved empirically. We study trade and financial flows from the United Kingdom from 1870 to 1913 and the United States in the interwar years. Trade and finance are robustly correlated, even after allowing for simultaneity. Evidence from the British Empire casts doubt on the idea that trade is a punishment device in the event of default.
Keywords: Complementarities; International Investment; International Trade
JEL Codes: F10; F30; F40; N10; N20; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade flows (F10) | Financial flows (F32) |
| Trade flows (F10) | Public investment (H54) |
| Trade flows (F10) | Private investment (E22) |