Anderson, James E. <br/><br/>
Gravity, Scale and Exchange Rates / 
James E. Anderson, Mykyta Vesselovsky, Yoto V. Yotov. 
 - Cambridge, Mass.  National Bureau of Economic Research  2013. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w18807 .
 - Working Paper Series (National Bureau of Economic Research)  no. w18807. .
<br/><br/> February 2013. 
<br/><br/> 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. 
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