EconPapers    
Economics at your fingertips  
 

The geography of trade in goods and asset holdings

Antonin Aviat and Nicolas Coeurdacier

Sciences Po publications from Sciences Po

Abstract: Gravity models have been widely used to describe bilateral trade in goods. Portes and Rey [Portes, R., Rey, H., 2005. The Determinants of Cross-Border Equity Flows. Journal of International Economics, 65(2), 269–296.] applied this framework to cross-border equity flows and found that distance, which proxies information asymmetries, is a surprisingly very large barrier to cross-border asset trade. We adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework. Providing different instruments for both endogenous variables, we show that a 10% increase in bilateral trade raises bilateral asset holdings by 6% to 7%. The reverse causality is also significant, albeit smaller. Controlling for trade, the impact of distance on asset holdings is drastically reduced. Keywords: Gravity models; International finance; International trade; Simultaneous equations

Keywords: Gravity models; International finance; International trade; Simultaneous equations (search for similar items in EconPapers)
JEL-codes: C31 F10 F36 (search for similar items in EconPapers)
Date: 2007-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (166) Track citations by RSS feed

Published in Journal of International Economics, 2007, pp.22-51

Downloads: (external link)
https://spire.sciencespo.fr/hdl:/2441/c8dmi8nm4pdj ... aphy-of-trade-nc.pdf (application/pdf)

Related works:
Journal Article: The geography of trade in goods and asset holdings (2007) Downloads
Working Paper: The geography of trade in goods and asset holdings (2007) Downloads
Working Paper: The Geography of Trade in Goods and Asset Holdings (2006) Downloads
Working Paper: The geography of trade in goods and asset holdings (2004) Downloads
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:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g708pipbp

Access Statistics for this paper

More papers in Sciences Po publications from Sciences Po Contact information at EDIRC.
Bibliographic data for series maintained by Spire @ Sciences Po Library ().

 
Page updated 2021-10-21
Handle: RePEc:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g708pipbp