NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does Trade Cause Capital to Flow? Evidence from Historical Rainfalls

Sebnem Kalemli-Ozcan, Alex Nikolsko-Rzhevskyy

NBER Working Paper No. 16034
Issued in May 2010
NBER Program(s):   DAE   IFM   ITI

Estimating the effect of trade on capital flows is difficult given the inherent identification problem. We use fluctuations in rainfall to capture the exogenous variation in trade between Germany, France, the U.K., and the Ottoman Empire during 1859-1913. The provisionistic policy of the Ottoman Empire|only surplus production was exported|constitutes the basis of our identification strategy. We find that one standard deviation in rainfalls from the mean leads to a 3.5 percent increase in Ottoman exports, which in turn causes a 10 percent increase in capital inflows from the three source countries. Our findings support trade theories predicting complementarity between trade and capital flows.

download in pdf format
   (1076 K)

email paper

This paper is available as PDF (1076 K) or via email.

This paper was revised on December 5, 2011

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Users who downloaded this paper also downloaded these:
Bordo, Eichengreen, and Kim w6738 Was There Really an Earlier Period of International Financial Integration Comparable to Today?
AntrĂ s and Caballero w13241 Trade and Capital Flows: A Financial Frictions Perspective
Alessandria, Kaboski, and Midrigan w16059 The Great Trade Collapse of 2008-09: An Inventory Adjustment?
de Blas and Russ w16029 All Banks Great, Small, and Global: Loan pricing and foreign competition
Taylor w8927 A Century of Current Account Dynamics
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us