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Bilateral Trade Flows, the Linder Hypothesis, and Exchange Risk

Jerry G. Thursby^1,2; Marie Thursby^1,2

¹ University of Michigan–Ann Arbor · ² The Ohio State University

Bilateral trade flows are used to examine the Linder hypothesis and the effect of exchange-rate variability in a gra vity-type trade model derived from an underlying demand and supply mo del. A behavioral model is used to justify examining these issues joi ntly. The model performs well empirically using a sample of seventeen countries for the period 1974-82. The authors find overwhelming supp ort for the Linder hypothesis and this version of the gravity model. Moreover, they find strong support for the hypothesis that increased exchange-rate variability affects bilateral trade flows. Copyright 1987 by MIT Press.

DOI

10.2307/1925537

Volume

69 (3)

Pages

488

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Sources

crossref openalex