TY  - JOUR
AU  - Kalemli-Ozcan,Sebnem
AU  - Nikolsko-Rzhevskyy,Alex
TI  - Does Trade Cause Capital to Flow? Evidence from Historical Rainfalls
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16034
PY  - 2010
Y2  - May 2010
UR  - http://www.nber.org/papers/w16034
L1  - http://www.nber.org/papers/w16034.pdf
N1  - Author contact info:
Sebnem Kalemli-Ozcan
John F. Kennedy School of Government
Harvard University
79 JFK Street, Mailbox 28
Cambridge, MA  02138
E-Mail: sebnem.kalemli-ozcan@mail.uh.edu

Alex Nikolsko-Rzhevskyy
Department of Economics, FCBE
University of Memphis
Memphis, TN 38152
E-Mail: alexr.work@gmail.com
AB  - 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.
ER  -