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Dev. Min Max Trade 2848 4.006 2.367 -6.724 9.452 Gold 6556 0.263 0.441 0.000 1.000 Silver 6556 0.050 0.219 0.000 1.000 Bimetal 6556 0.010 0.099 0.000 1.000 Monetary union 11025 0.017 0.128 0.000 1.000 Volatility 3977 1.514 1.583 0.000 9.230 GDP 2050 19.741 1.969 14.358 25.236 GDP per capita 2050 15.150 0.926 12.367 17.639 Distance 10071 8.270 0.851 4.922 9.417 Border 11025 0.034 0.182 0.000 1.000 Common language 11025 0.093 0.291 0.000 1.000 Political Union 11025 0.023 0.150 0.000 1.000 MFN 11025 0.219 0.413 0.000 1.000 dqg rwkhu sxeolfdwlrqv iurp wkh shulrg> d ghwdlohg ghvfulswlrq ri rxu vrxufhv dsshduv lq wkh gdwd dsshqgl{1 Wudgh jxuhv zhuh wudqviruphg lqwr 4<<3 X1V1 grooduv xvlqj d X1V1 frqvxphu sulfh lqgh{ dqg dqqxdo dyhudjh h{fkdqjh udwhv1 Wklv pdgh rxu wudgh lqirupdwlrq frpsdudeoh wr wkh uhdo JGS gdwd lq Pdgglvrq +4<<8,19 Lqirupdwlrq rq hyhu| frxqwu|*v prqhwdu| uhjlph zdv xvhg wr fuhdwh gxpp| yduldeohv lqglfdwlqj zkhwkhu dq| sdlu ri frxqwulhv vkduhg d frpprq prqhwdu| vwdqgdug1 Lq Wdeoh 4 zh uhsruw wkh prqhwdu| vwdqgdug xvhg lq hdfk frxqwu| wkdw hqwhuv rxu edvholqh uhjuhvvlrq1 Revhuyh wkdw wkhuh zdv d jhqhudo pryhphqw lq idyru ri wkh dgrswlrq ri wkh jrog vwdqgdug dv wkh qlqhwhhqwk fhqwxu| surjuhvvhg/ dowkrxjk d qxpehu ri frxqwulhv uhpdlqhg rxwvlgh wkh jrog eorf wkurxjkrxw rxu shulrg ri dqdo|vlv1 Wkhuh duh dovr d qxpehu ri lpsruwdqw frxqwulhv wkdw fkdqjhg uhjlphv wkurxjkrxw wkh shulrg1 Lq dgglwlrq wr furvv0vhfwlrqdo yduldwlrq/ wkhvh frxqwulhv surylgh lpsruwdqw wlph0vhulhv yduldwlrq lq uhjlph vwdqfh1 Wklv lpsuryhv wkh srvvlelolw| ri lghqwli|lqj krz d gurs lq wkh frvwv ri wudgh +l1h1/ d pryh wr ru dzd| iurp d vlplodu frpprglw| prqh| uhjlph, lv dvvrfldwhg zlwk fkdqjhv lq elodwhudo wudgh1 Zh frqvwuxfwhg rxu phdvxuh ri h{fkdqjh0udwh yrodwlolw| dv wkh vwdqgdug ghyldwlrq ri wkh uvw glhuhqfh ri wkh qdwxudo orjdulwkp ri wkh prqwko| elodwhudo h{fkdqjh udwh iru wkh 9 Pdgglvrq*v jxuhv wdnh lqwr frqvlghudwlrq sxufkdvlqj srzhu glhuhqfhv dfurvv frxqwulhv dqg duh wkhuhiruh ehwwhu vxlwhg iru lqwhuqdwlrqdo frpsdulvrqv1 47 Wdeoh 9= Elodwhudo h{fkdqjh udwh yrodwlolw| xqghu hdfk prqhwdu| uhjlph Monetary standard # Obs Mean Std. Dev. 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zlwk wkh vdph frorql}hudv zhoo dv frxqwulhv wkdw iruphg d vlqjoh srolwlfdo hqwlw|h1j1/ Uxvvld dqg Ilqodqg/ dqg/ xqwlo 4<38/ Vzhghq dqg Qruzd|1 8 Edvholqh uhvxowv Lq froxpq 4 ri Wdeoh : zh uhsruw srrohg ROV hvwlpdwhv zlwk Zklwh/ khwhurvfhgdvwlflw|0 urexvw vwdqgdug huuruv ri wkh edvholqh uhjuhvvlrq144 Wklv vshflfdwlrq h{sodlqv qhduo| 93 shufhqw ri wkh yduldwlrq lq elodwhudo wudgh rzv1 Wkh frh!flhqwv rq JGS/ JGS shu fdslwd/ dqg glvwdqfh duh suhflvho| hvwlpdwhg dqg wkhlu vljqv dqg pdjqlwxghv duh frqvlvwhqw zlwk wkh vwdqgdug judylw| prgho*v suhglfwlrqv1 Pruhryhu/ wkh| duh uhpdundeo| vlplodu wr wkrvh irxqg e| rwkhu dxwkruv1 Rxu hvwlpdwhv vkrz wkdw prqhwdu| uhjlphv kdg d qrq0 qhjoljleoh lpsdfw rq lqwhuqdwlrqdo wudgh dqg duh lq dffrugdqfh zlwk suhylrxv vwxglhv1 Rwkhu h{sodqdwru| yduldeohv vhhp lq olqh zlwk rxu suhglfwlrqv dowkrxjk lq vrph lqvwdqfhv wkh| duh vwdwlvwlfdoo| lqvljqlfdqw1 Dqqxdo furvv0vhfwlrq uhjuhvvlrq uhvxowv dsshdu lq Wdeoh ;1 Wkh olplwhg vl}h ri rxu dqqxdo vdpsohv iru vrph |hduv uhvxowhg lq srru uhjuhvvlrq uhvxowv/ exw lq eurdg whupv dqqxdo hvwlpdwhv vxssruw rxu frqfoxvlrqv1 814 Prqhwdu| yduldeohv Rxu edvholqh uhjuhvvlrq fdqqrw uhmhfw wkh k|srwkhvlv wkdw prqhwdu| uhjlph frruglqdwlrq kdg d vljqlfdqw lpsdfw rq elodwhudo wudgh rzv1 Wkh frh!flhqw rq jrog/ vloyhu/ dqg prqhwdu| xqlrq duh srvlwlyh dqg vwdwlvwlfdoo| vljqlfdqw1 Rxu edvholqh uhvxowv vkrz wkdw 43 Wkh glvwdqfh phdvxuh frphv lq wxuq iurp wkh FLD*v zhevlwh dqg phdvxuhv Juhdw Flufoh glvwdqfh1 Zh dovr wu|/ dv shu Mh Zlooldpvrq*v vxjjhvwlrq/ d frvw2glvwdqfh lqwhudfwlrq wr doorz iru idoolqj wudqvsruwdwlrq frvwv dqg wr uhgxfh srwhqwldo eldv iurp srrolqj wkh gdwd1 44 Vwdqgdug huuruv duh fruuhfwhg iru khwhurvfhgdvwlflw| dprqj frxqwu| sdluv1 4: Wdeoh := Srrohg ROV uhjuhvvlrqv Regressors Baseline Reg. 1 Reg. 2 Reg. 3 Reg. 4 Reg. 5 Gold 0.479 0.367 0.399 0.399 1.576 -- (0.124) (0.125) (0.124) (0.120) (0.442) Silver 0.765 0.749 0.786 0.995 -0.087 -- (0.394) (0.373) (0.378) (0.365) (0.368) Bimetal -0.303 -0.336 -0.341 -0.292 0.707 -- (0.269) (0.264) (0.269) (0.267) (0.149) Monetary union 0.716 0.527 0.621 0.631 0.655 1.046 (0.186) (0.192) (0.187) (0.188) (0.185) (0.205) Volatility 0.167 -0.253 0.020 -0.014 0.194 -0.114 (0.044) (0.115) (0.061) (0.047) (0.045) (0.135) Squared volatility -- 0.068 -- -- -- -- (0.016) Gold * volatility -- -- -- -- -0.309 -- (0.127) Silver * volatility -- -- -- -- -0.539 -- (0.373) Bimetal * volatility -- -- -- -- -0.212 -- (0.354) GDP 0.861 0.867 0.863 0.904 0.870 0.896 (0.028) (0.027) (0.028) (0.026) (0.027) (0.031) GDP per capita 0.656 0.588 0.612 0.759 0.604 0.491 (0.081) (0.081) (0.083) (0.083) (0.083) (0.101) Distance -0.661 -0.642 -0.664 -0.713 -0.651 -0.722 (0.045) (0.045) (0.045) (0.045) (0.045) (0.056) Border 0.625 0.610 0.594 0.510 0.632 0.263 (0.122) (0.122) (0.123) (0.118) (0.121) (0.144) Political union 0.927 0.968 0.982 1.101 0.915 0.527 (0.293) (0.287) (0.290) (0.289) (0.292) (0.275) Common language 0.165 0.158 0.171 0.111 0.143 0.051 (0.167) (0.163) (0.164) (0.159) (0.168) (0.133) MFN 0.142 0.153 0.109 0.091 0.149 0.172 (0.095) (0.094) (0.096) (0.090) (0.095) (0.111) Brazil dummy -- -- -- 2.243 -- -- (0.207) Chile dummy -- -- -- 0.868 -- -- (0.366) Constant -18.438 -17.353 -17.632 -20.365 -18.003 -14.117 (1.392) (1.394) (1.415) (1.409) (1.407) (1.648) Number of obs 1140 1140 1108 1140 1140 622 R-squared 0.595 0.601 0.603 0.631 0.598 0.677 Root MSE 1.453 1.442 1.445 1.388 1.449 1.242 NOTES: Dependendent variable: ln(trade). Robust standard errors are reported in parentheses. Year dummies are not reported. Regression 2 excludes 32 observations with volatility above the 95th percentile. Regression 5 focuses on gold countries only. 4; Wdeoh ;= Dqqxdo ROV uhjuhvvlrqv Regressors 1870 1875 1880 1885 1890 1895 1900 1905 1910 Gold 1.583 0.894 2.603 0.191 -0.465 1.993 0.449 0.161 0.662 (0.490) (0.320) (0.733) (0.681) (0.371) (0.460) (0.256) (0.306) (0.250) Silver 1.479 -- -- -- -- -- -0.307 -- -- (0.410) (1.230) Bimetal -0.366 -0.987 -- -- -- -- -- -- -- (0.282) (0.529) Monetary union 0.129 -0.138 2.558 0.737 0.363 1.448 0.380 0.933 0.778 (0.404) (0.662) (0.817) (0.784) (0.646) (0.477) (0.459) (0.575) (0.408) Volatility 0.396 -1.102 1.995 -0.899 0.209 0.373 0.163 0.073 0.282 (0.190) (0.246) (0.917) (0.971) (0.364) (0.340) (0.070) (0.172) (0.082) GDP 0.817 0.780 1.047 0.906 0.736 1.064 0.822 0.991 0.886 (0.095) (0.097) (0.097) (0.091) (0.089) (0.112) (0.055) (0.076) (0.052) GDP per capita 1.617 1.519 1.120 1.268 0.991 0.559 0.825 0.298 0.291 (0.280) (0.325) (0.404) (0.306) (0.412) (0.533) (0.157) (0.172) (0.140) Distance -0.349 -0.724 -0.977 -0.888 -0.912 -0.755 -0.607 -0.672 -0.520 (0.210) (0.165) (0.156) (0.140) (0.141) (0.196) (0.099) (0.126) (0.090) Border 1.506 0.931 0.195 0.184 0.529 -0.023 0.645 0.503 0.697 (0.366) (0.379) (0.377) (0.374) (0.371) (0.417) (0.275) (0.405) (0.274) Political union 0.143 0.401 0.970 0.439 0.514 0.917 1.088 0.816 0.465 (0.615) (0.788) (0.778) (0.862) (1.026) (0.714) (0.709) (0.695) (0.907) Common language 0.611 0.545 -0.076 0.046 0.799 -0.488 0.228 -0.214 0.078 (0.411) (0.506) (0.354) (0.303) (0.585) (0.350) (0.301) (0.555) (0.236) MFN 0.187 -0.346 0.030 0.234 0.370 -0.028 -0.102 0.139 0.287 (0.344) (0.287) (0.308) (0.252) (0.306) (0.350) (0.205) (0.246) (0.190) Constant -34.649 -28.406 -29.905 -26.777 -18.849 -22.036 -21.114 -15.682 -15.030 (5.121) (5.335) (6.502) (5.044) (6.281) (7.781) (3.134) (3.105) (2.456) Number of obs 90 56 59 70 139 81 274 189 182 R-squared 0.673 0.852 0.835 0.794 0.486 0.753 0.567 0.568 0.650 Root MSE 1.134 0.877 0.963 1.172 1.755 1.310 1.550 1.643 1.215 NOTES: Dependendent variable: ln(trade). 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Robust, autocorrelation-corrected standard errors are reported in parentheses. qg d qhjdwlyh dqg vwdwlvwlfdoo| lqvljqlfdqw hhfw1 Zh kdyh rqo| whq revhuydwlrqv lq wklv uhgxfhg vdpsoh zkhuh uhjlphv pryhg dzd| iurp frruglqdwlrq/ vr lpsuhflvh uhvxowv duh qrw d vxusulvh1 Dqrwkhu zd| wr ghdo zlwk frxqwu|0vshflf khwhurjhqhlw| ru sdlu vshflf khwhurjhqhlw| lv wr xvh d {hg hhfwv hvwlpdwru1 Iluvw zh frqwuro iru sdlu0vshflf khwhurjhqhlw| e| dgglqj dq lqglfdwru iru hdfk ri 638 sdluv lq rxu vdpsoh1 Uhjuhvvlrq 4 ri Wdeoh 43 vkrzv wkdw frruglqdwlrq rq wkh jrog vwdqgdug vwloo kdv d srvlwlyh dqg vwdwlvwlfdoo| vljqlfdqw dvvrfldwlrq zlwk wudgh1 Wklv {hg hhfwv furvv0vhfwlrqdo frh!flhqw lv gluhfwo| frpsdudeoh wr wkh wlph0vhulhv h{dplqdwlrq1 Rxu hvwlpdwh lpsolhv wkdw wudgh lv 48 shufhqw kljkhu dprqj frxqwulhv rq jrog1 Frpsdulqj wklv wr wkh glhuhqfh0lq0glhuhqfhv dssurdfk vxjjhvwv wkdw lw zrxog wdnh durxqg yh |hduv diwhu prylqj wr frruglqdwlrq wr uhdfk wklv kljkhu ohyho ri wudgh1 Suhglfwdeo| wkh frh!flhqw rq wkh prqhwdu| xqlrq lqglfdwru vkulqnv lq pdjqlwxgh dqg lv qr orqjhu vwdwlvwlfdoo| vljqlfdqw vlqfh wkhuh lv olwwoh yduldwlrq lq wkh yduldeoh ryhu wlph1 Lw lv uh0dvvxulqj wr vhh wkdw wkh srlqw hvwlpdwh lv vwloo srvlwlyh 57 Wdeoh 43= Hqgrjhqhlw| dqg khwhurjhqhlw| uhjuhvvlrqv Regressors Country-Pair FE Country FE IV Regression Gold 0.15 0.28 0.97 (0.077) (0.125) (1.32) Silver 0.18 1.10 --- (0.27) (0.396) Bimetallism 0.19 -0.31 --- (0.31) (0.35) Monetary union 0.26 1.34 1.31 (0.54) (0.389) (1.36) Volatility 0.02 0.05 0.11 (0.02) (0.03) (0.37) GDP 0.55 0.36 0.91 (0.148) -0.27 (0.091) GDP per capita 0.31 0.43 0.81 (0.092) (0.113) (0.519) Distance*Cost Index -0.33 --- --- (0.121) Distance -0.49 -0.74 (0.136) (0.103) Border --- 0.57 0.27 (0.30) (0.39) Political union 0.16 0.91 0.22 (0.69) (0.53) (1.14) MFN -0.03 -0.16 0.07 (0.11) (0.13) (0.22) Country-Pair Controls yes no no Country Controls no yes no constant -9.53 -7.44 -21.26 (3.290) (6.584) (6.210) Number of obs 1140 1140 681 R-squared 0.50 0.74 0.67 NOTES: Robust standard errors are reported. Year dummies are not reported. Regression 3-- Variable instrumented for: Gold and Monetary Union. 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Year dummies are not reported. Regression 3-- Variable instrumented for: Gold and Monetary Union. 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Wdeoh 45= Hqgrjhqhlw| ri JGS dqg rplwwhg yduldeohv Regressors Reg.1* Reg. 2* Reg. 3 Reg. 4 Reg. 5 Reg. 6 Gold 0.540 0.643 0.689 0.595 0.482 0.431 (0.166) (0.191) (0.119) (0.126) (0.163) (0.165) Silver 2.070 3.833 1.371 1.395 0.726 0.836 (0.452) (0.736) (0.356) (0.352) (0.39) (0.418) Bimetal -0.085 0.116 -0.082 -0.114 -0.368 -0.281 (0.186) (0.251) (0.300) (0.293) (0.35) (0.35) Monetary union 1.105 1.061 0.612 0.642 0.725 0.71 (0.246) (0.244) (0.191) (0.192) (0.43) (0.43) Volatility 0.41 0.425 0.084 0.076 0.168 0.159 (0.046) (0.046) (0.041) (0.046) (0.052) (0.051) GDP 1.181 1.172 1.085 1.067 0.862 0.859 (0.082) (0.081) (0.035) (0.033) (0.046) (0.046) GDP per capita 1.153 1.146 0.561 0.713 0.654 0.673 (0.203) (0.204) (0.109) (0.135) (0.109) (0.109) Distance -0.702 -0.691 -1.064 -1.027 -0.567 -0.601 (0.068) (0.068) (0.081) (0.080) (0.153) (0.136) Distance*Cost Index Ratio -- -- -- -- -0.143 -- (0.20) Border 0.521 0.546 0.386 0.399 0.624 0.615 (0.183) (0.180) (0.141) (0.136) (0.241) (0.242) Political union 0.935 0.908 0.939 0.944 0.922 0.916 (0.281) (0.283) (0.247) (0.242) (0.60) (0.60) Common language -0.206 -0.226 0.041 0.010 0.168 0.209 (0.206) (0.206) (0.184) (0.179) (0.28) (0.27) MFN 0.106 0.112 -0.021 -0.026 0.145 0.139 (0.108) (0.108) (0.089) (0.088) (0.16) (0.16) Same hemisphere -- -- -1.278 -1.085 Distance*1875 dummy -0.161 (0.237) (0.262) (0.14) Abs. difference in GDP per capita (log) -- -- 0.142 0.114 Distance*1880 dummy -0.139 (0.039) (0.038) (0.13) Abs. difference in land/population (log) -- -- 0.112 0.107 Distance*1885 dummy -0.298 (0.035) (0.034) (0.147) Latin America -- -- 0.816 0.804 Distance*1890 dummy -0.156 (0.254) (0.251) (0.14) Asia -- -- -0.680 -0.630 Distance*1895 dummy -0.162 (0.246) (0.248) (0.15) Armed conflict -- -- -0.318 -0.240 Distance*1900 dummy -0.015 (0.226) (0.223) (0.13) Brazil dummy -- -- -- 0.668 Distance*1905 dummy -0.032 (0.276) (0.14) Chile dummy -- -- -- -0.228 Distance*1910 dummy 0.123 (0.379) (0.13) Number of obs 881 881 900 900 1140 1140 R-squared 0.586 0.590 0.728 0.732 0.595 0.598 Root MSE 1.465 1.460 1.191 1.185 1.453 1.452 NOTES: Dependent variable: ln(trade). Robust standard errors are reported in parentheses. Year dummies and constant are not reported. 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Robust standard errors are reported in parentheses. Year dummies are not reported. 64 81716 Prgho Vshflfdwlrq Zh dovr uxq rwkhu vshflfdwlrqv iru sdqho gdwd1 Wdeoh 47 suhvhqwv uhvxowv iurp d zhljkwhg0 ohdvw0vtxduhv/ ehwzhhq hvwlpdwru dqg d udqgrp hhfwv hvwlpdwru ri rxu edvholqh htxd0 wlrq157 Wkh ehwzhhq hvwlpdwru |lhogv uhvxowv vrphzkdw vlplodu wr wkh srrohg ROV uh0 vxowv/ dowkrxjk prvw ri rxu prqhwdu| yduldeohv kdyh lqfuhdvhg lq pdjqlwxgh1 Wkh jrog vwdqgdug yduldeoh uhpdlqv vljqlfdqw/ exw lwv hhfw qrz lv wr lqfuhdvh wudgh e| 415 wlphv1 Wkh prqhwdu| xqlrq yduldeoh vxjjhvwv wkdw wudgh lqfuhdvhv e| urxjko| 419 wlphv zkhq wzr frxqwulhv ehorqj wr vxfk dq duudqjhphqw1 Wkh hhfw ri mrlqlqj d prqhwdu| xqlrq/ xvlqj wkh suhylrxv orjlf wkdw dq| wzr prqhwdu| xqlrq frxqwulhv vkduh wkh vdph vwdqgdug wkxv lpsolhv wkdw wudgh lv lqfuhdvhg e| 818 wlphv1 Dgglwlrqdoo| wkh vwdqgdug judylw| ydul0 deohv uhpdlq qhduo| xqfkdqjhg lq whupv ri pdjqlwxgh dqg suhflvlrq1 Wkh udqgrp hhfwv hvwlpdwru |lhogv uhvxowv forvhu wr wkh edvholqh uhjuhvvlrq1 Xvlqj d Kdxvpdq whvw zh uhmhfw wkh qxoo k|srwkhvlv ri qr fruuhodwlrq ehwzhhq wkh uhjuhvvruv dqg wkh glvwxuedqfhv dw wkh rqh shufhqw ohyho1 Dqrwkhu lvvxh zh dgguhvv lv wkh srvvlelolw| ri d vdpsoh vhohfwlrq eldv1 Gxulqj rxu shulrg ri dqdo|vlv/ wudgh vwdwlvwlfv jhqhudoo| zhuh uhsruwhg rqo| iru wkh odujhvw wudglqj sduwqhuv1 Vrph frxqwulhv glg qrw uhsruw gdwd iru sduwqhuv zkrvh wudgh zdv ehorz d jlyhq wkuhvkrog1 Wkhuh duh dovr pdq| frxqwulhv wkdw kdyh ehhq rplwwhg iurp wkh vdpsoh vlpso| gxh wr plvvlqj gdwd1 Vxfk plvvlqj revhuydwlrqv frxog jlyh xv lqfrqvlvwhqw hvwlpdwhv ri rxu sdudphwhuv1 Zh frqmhfwxuh wkdw vdpsoh vhohfwlrq pd| ohdg wr d grzqzdug eldv rq rxu jrog vwdqgdug gxpp|1 Wklv frxog dulvh li pdq| qrq0jrog vwdqgdug dqg srru frxqwulhv/ vxfk dv wkh shulskhu| vwdwhv ri Hxursh/ Vrxwkhdvw Dvld dqg Dphulfd/ kdg yhu| orz ohyhov ri wudgh ru xquhsruwhg wudgh zlwk rwkhu jrog vwdqgdug frxqwulhv lq wkh fruh ri Hxursh1 Ohdylqj wkhvh frxqwulhv rxw frxog plvohdglqjo| zhdnhq wkh frh!flhqw rq wkh jrog vwdqgdug gxpp| dqg pd| dovr jlyh plvohdglqj sdudphwhuv iru wkh JGS hhfwv1 Wklv sureohp fdq eh uhvroyhg wr 57 Wkhzhljkwv dgmxvw iru wkh xqedodqfhg sdqho1 Zh xvh wkh lqyhuvh ri wkh qxpehu ri wlph shulrgv d frxqwu|0sdlu lv lq wkh sdqho wr zhljkw wkh gdwd dqg wr gdpshq wkhlu ryhu0uhsuhvhqwdwlrq lq wkh vdpsoh1 65 Wdeoh 47= Sdqho uhjuhvvlrqv Regressors Fixed effects (Between est.) Random Effects Reg. 1 Reg. 2* Reg. 3 Reg. 4* Gold 0.902 0.714 0.164 0.136 (0.304) (0.303) (0.074) (0.074) Silver 1.883 2.315 0.305 0.307 (1.450) (1.443) (0.245) (0.243) Bimetal -3.529 -3.739 0.280 0.259 (2.582) (2.553) (0.306) (0.303) Monetary union 0.989 0.804 0.452 0.431 (0.376) (0.376) (0.366) (0.365) Volatility 0.300 0.000 0.016 -0.045 (0.102) (0.141) (0.023) (0.030) GDP 0.849 0.836 0.835 0.844 (0.057) (0.056) (0.050) (0.050) GDP per capita 0.882 0.794 0.385 0.357 (0.149) (0.153) (0.072) (0.072) Distance -0.601 -0.604 -0.714 -0.723 (0.100) (0.099) (0.099) (0.101) Border 0.697 0.627 0.628 0.561 (0.305) (0.306) (0.366) (0.368) Political union 0.622 0.664 0.992 0.976 (0.430) (0.426) (0.394) (0.394) Common language 0.137 0.187 0.271 0.282 (0.300) (0.301) (0.361) (0.364) MFN 0.138 0.095 -0.026 -0.024 (0.180) (0.182) (0.092) (0.092) Constant -21.871 -19.681 -13.525 -13.143 (2.778) (2.822) (1.599) (1.608) Number of obs 1140 1108 1140 1108 R-squared 0.644 0.651 0.578 0.589 Root MSE 1.318 1.313 -- -- NOTES: Dependent variable: ln(trade). Standard errors are reported in parentheses. Year dummies are not reported. The between estimation regression was performed using weigthed least squares. * Indicates that the top 5th percentile of the volatility observations was excluded. vrph ghjuhh e| xvlqj Khfnpdq*v vhohfwlrq fruuhfwlrq hvwlpdwru1 Iluvw zh suhglfw vhohfwlrq iurp wkh vdpsoh dqg wkhq xvh wklv lqirupdwlrq wr fruuhvsrqglqjo| dgmxvw ROV frh!flhqwv wr dffrxqw iru vhohfwlrq hhfwv1 Wdeoh 48 suhvhqwv wkh uhvxowv ri wkh pd{lpxp olnholkrrg hvwlpdwlrq ri wkh ROV sd0 udphwhuv dgmxvwhg iru wkh vhohfwlrq eldv1 Iurp wkh uvw0vwdjh hvwlpdwhv lw dsshduv wkdw pruh glvwdqw wudglqj sduwqhuv uhsruw wkhlu wudgh ohvv riwhq +olnho| ehfdxvh wudgh zdv qdw0 xudoo| vpdoohu ehwzhhq wkhvh g|dgv, dqg pruh xuedql}hg frxqwulhv duh ohvv olnho| wr kdyh plvvlqj gdwd +wklv pd| eh d sur{| iru wkh ghyhorsphqw ri wkh g|dg,1 Lq wkh vhfrqg0vwdjh/ zkhq zh wdnh dffrxqw ri vdpsoh vhohfwlrq/ qrqh ri rxu uhvxowv fkdqjh gudvwlfdoo| iurp wkh edvholqh1 Wkh frh!flhqw rq wkh jrog vwdqgdug/ vloyhu vwdqgdug dqg wkh prqhwdu| xqlrq lqglfdwruv lqfuhdvh lq pdjqlwxgh dv h{shfwhg1 Vdpsoh vhohfwlrq grhv qrw vhhp wr ghq| wkh lpsruwdqfh ri kdylqj d frpprq prqhwdu| vwdqgdug ru mrlqlqj d prqhwdu| xqlrq/ qhlwkhu fdq lw dffrxqw iru wkh srvlwlyh hhfw ri yrodwlolw|1 Dqrwkhu vshflfdwlrq zh udq zdv wkh Wrelw hvwlpdwru1 Lq rxu fdvh Wrelw lv wkh frq0 vlvwhqw hvwlpdwru zkhq wkh ghshqghqw yduldeoh lv wuxqfdwhg dw ru deryh 31 Dv phqwlrqhg 66 Wdeoh 48= Vhohfwlrq fruuhfwlrq Regressors Reg. 1 Reg. 2 First-Stage Selection Equation Gold 0.649 0.830 Gold 0.169 (0.136) (0.153) (0.175) Silver 1.493 2.585 Silver 0.608 (0.384) (0.632) (0.449) Bimetal -0.113 0.337 Bimetal 6.1 (0.252) (0.290) (0.415) Monetary union 0.777 0.707 Monetary union 7.268 (0.178) (0.176) (0.402) Volatility 0.269 0.289 Volatility 0.0455 (0.042) (0.043) (.044) Gold * volatility --- -0.293 GDP 0.3844 (0.142) (.3662) Silver * volatility --- -1.563 GDP per capita 0.1228 (0.647) (0.3725) Bimetal * volatility --- -0.770 Distance -0.294 (0.294) (0.119) GDP 0.892 0.891 Border 0.395 (0.034) (0.035) (0.489) GDP per capita 0.617 0.592 Political union 8.195 (0.128) (0.129) (0.819) Distance -0.612 -0.601 Common language 0.1185 (0.053) (0.054) (0.338) Border 0.686 0.708 MFN -0.175 (0.130) (0.128) (0.1843) Political union 0.057 0.025 Product of Land Area -0.054 (0.178) (0.179) (0.042) Common language 0.633 0.603 Product of Percentage in Cities > 50K 0.77 (0.242) (0.242) (0.228) MFN 0.250 0.257 Product of Population 0.263 (0.098) (0.098) (0.337) Constant -18.862 -18.564 Constant -8.66 (1.896) (1.913) (3.585) rho -0.238 -0.241 (0.094) (0.097) Number of obs 1101 1101 NOTES: Dependent variable: ln(trade). Robust standard errors are reported in parentheses Year dummies are not reported. deryh/ frxqwulhv uduho| frghg d wudgh ydoxh wr 3 hyhq zkhq wkh dfwxdo wudgh ydoxhv zhuh lq doo olnholkrrg }hur ydoxhv1 Wkxv zh duh xqdeoh wr frpsohwho| glvwlqjxlvk ehwzhhq d plvvlqj revhuydwlrq dqg d wuxh }hur iru wudgh1 Zh uh0frgh doo plvvlqj wudgh revhuydwlrqv wr 3 zlwk wkh xqghuvwdqglqj wkdw wklv ryhu0hvwlpdwhv wkh wuxh qxpehu ri }hurv1 Wklv pd| eh d edg zd| wr fkdudfwhul}h d plvvlqj wudgh revhuydwlrq hvshfldoo| ehwzhhq wzr xvxdoo| lpsruwdqw wudgh sduwqhuv1 Grlqj wklv zh lqwhusuhw wkh frh!flhqwv ri wkh uh0frghg yduldeohv dv rqh erxqg iru wkh sdudphwhu hvwlpdwhv/ zkloh wkh pdujlqdo hhfwv iru wkh ruljlqdo ghshqghqw yduldeohv duh shukdsv dqrwkhu erxqg1 Uh0frglqj wkh plvvlqj wudgh gdwd wr }hur jlyhv xv qhduo| 633 pruh revhuydwlrqv1 Wkh shufhqwdjh ri }hur revhuydwlrqv lv qhdu 63 shufhqw1 Lq wdeoh 49 zh uhsruw erwk ROV dqg Wrelw iru wkh gdwd zlwk wkh }hur0frghg gdwd dqg wkh ruljlqdo gdwd158 Wkh Wrelw hvwlpdwhv dqg ROV hvwlpdwhv iru wkh ruljlqdo gdwd |lhog vlplodu uhvxowv159 58 Lqhdfk fdvh wkh lqghshqghqw yduldeoh lv oq +4 . W udghlmw , = Lq wklv zd| pdujlqdo hhfwv duh lqwhu0 suhwdeoh dv hodvwlflwlhv dqg uhvxowv duh frpsdudeoh wr Wdeoh :/ zkloh wklv wudqvirupdwlrq dovr pdnhv wkh ghshqghqw yduldeoh olh deryh }hur1 A A A 59 Zh uhsruw wkh pdujqldo hhfwv iru wkh Wrelw frh!flhqwv dv  + {@ , zkhuh lv wkh glwulexwlrq 67 Wdeoh 49= Wrelw hvwlpdwlrq Regressors OLS TOBIT Reg. 1 Reg. 2* Reg. 3 Reg. 4* Gold 0.636 0.546 0.637 0.508 (0.135) (0.136) (0.130) (0.181) Silver 1.511 1.184 1.506 1.403 (0.460) (0.583) (0.577) (0.708) Bimetal -0.015 0.529 -0.011 1.033 (0.379) (0.346) (0.677) (1.056) Monetary union 0.650 0.847 0.653 0.981 (0.179) (0.208) (0.179) (0.274) Volatility 0.187 0.166 0.188 0.217 (0.040) (0.038) (0.035) (0.047) Gold * volatility -0.315 -0.265 -0.315 -0.217 (0.116) (0.109) (0.111) (0.150) Silver * volatility -0.583 -0.726 -0.608 -1.167 (0.365) (0.324) (0.274) (0.369) Bimetal * volatility -0.225 -0.729 -0.221 -0.702 (0.356) (0.782) (1.102) (1.556) GDP 0.825 0.944 0.828 1.199 (0.023) (0.020) (0.024) (0.033) GDP per capita 0.562 0.844 0.566 1.076 (0.073) (0.069) (0.064) (0.085) Distance -0.603 -0.819 -0.607 -1.072 (0.041) (0.041) (0.043) (0.060) Border 0.614 0.649 0.610 0.483 (0.117) (0.158) (0.151) (0.2280 Political union 0.144 -0.043 0.142 -0.095 (0.142) (0.168) (0.147) (0.214) Common language 0.849 1.317 0.856 1.876 (0.277) (0.291) (0.207) (0.310) MFN 0.158 -0.076 0.161 -0.175 (0.084) (0.087) (0.082) (0.114) Constant -16.805 -22.946 -16.911 -30.780 (1.211) (1.160) (1.111) (1.506) Number of obs 1150 1638 1150 1638 R-squared 0.620 0.680 -- -- Root MSE 1.290 1.590 1.280 2.020 NOTES: Dependent variable: ln(1+trade). Standard errors are reported in parentheses. Year dummies are not reported. 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Robust standard errors are reported in parentheses. 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Robust standard errors are reported in parentheses. Year dummies are not reported. 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