Working Paper: NBER ID: w12188
Authors: Marianne Baxter; Michael A. Kouparitsas
Abstract: This paper undertakes an exhaustive search for robust determinants of international trade, where "robustness" is tested using three popular empirical methods. The paper is frankly atheoretical: our goal is solely to establish statistically robust relationships. Along the way, however, we relate our results to the empirical results obtained by prior researchers and to the received theory of international trade. We find that robust variables include a measure of the scale of factor endowments; fixed exchange rates; the level of development; and current account restrictions. Variables that are robust under certain methods and sample periods include exchange rate volatility, an index of sectoral similarity, and currency union. However, the estimated coefficient n currency union is much smaller than estimates obtained by prior researchers.
Keywords: No keywords provided
JEL Codes: F10; C23; O24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bilateral factor endowments (F16) | bilateral trade flows (F10) |
| same stage of development (O11) | bilateral trade (F10) |
| similar industrial structures (L16) | bilateral trade (F10) |
| restrictions on current account transactions (F32) | bilateral trade (F10) |
| fixed exchange rates (F31) | bilateral trade (F10) |
| currency unions (F36) | bilateral trade (F10) |
| exchange rate volatility (F31) | bilateral trade (F10) |