Gravity, Scale and Exchange Rates

James Anderson, Mykyta Vesselovsky and Yoto Yotov

No 18807, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a structural gravity model that introduces scale effects in bilateral trade. Scale effects and incomplete passthrough give two channels through which exchange rates have real effects on trade patterns. Estimates from Canadian provincial trade data identify these effects through their interaction with the US border. We find statistically and quantitatively significant economies of scale in cross-border trade in almost 2/3 of sectors. Real effects of exchange rate changes on trade are found for 12 of 19 goods sectors and none of 9 services sectors.

JEL-codes: F10 F4 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-int and nep-opm
Note: IFM ITI
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Citations: View citations in EconPapers (19)

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