Distance(s) and the volatility of international trade(s)

Arnaud Mehl, Giulia Sabbadini, Martin Schmitz and Cédric Tille

European Economic Review, 2024, vol. 167, issue C

Abstract: We show that distance matters for the volatility of international trade and financial transactions on top of its well-known impact for their levels. We conduct event studies on the global financial crisis and the Covid-19 pandemic with country-level and product-level data, and a longer panel data analysis. We consider measures of physical, virtual, and language distance jointly – the latter two proxying for ease of communication. We find evidence of larger trade declines in more distant country dyads and underscore the relevance of information frictions rather than shipment costs. Physical distance matters for trade volatility beyond goods, as do virtual and language distances. Physical and virtual distances amplify each other's effects at the country level, as do virtual and language distances at the product level. Distance effects are also weaker for homogenous products and foreign direct investment and banking activity entailing local presence, again pointing to the importance of information frictions.

Keywords: Distance; Gravity; Volatility; International trade; International finance; Great trade collapse; Covid-19 pandemic (search for similar items in EconPapers)
JEL-codes: F10 F30 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292124000862
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Distance(s) and the Volatility of International Trade(s) (2020)
Working Paper: Distance(s) and the Volatility of International Trade(s) (2019)
Working Paper: Distance(s) and the volatility of international trade(s) (2019)
Working Paper: Distance(s) and the volatility of international trade(s) (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:167:y:2024:i:c:s0014292124000862

DOI: 10.1016/j.euroecorev.2024.104757

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().