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Since McCallum's (1995) finding of surprisingly high border effects on trade between the US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to measure this effect accurately. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976-2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations. [ABSTRACT FROM AUTHOR]

This paper estimates the effects of the Canada-US Free Trade Agreement (CUSFTA) on trade, sales of foreign affiliates of multinational enterprises, and total bilateral commerce (aggregate of both trade ands sales of foreign affiliates) in the manufacturing sector. The empirical investigation is carried out over a panel dataset covering the US bilateral transactions with the Organization for Economic Cooperation and Development (OECD) countries for the period 1983-1998. The empirical specification is guided by a gravity-based model that accounts for trade and the operation of foreign affiliates as alternative modes of accessing foreign markets. The results show that the CUSFTA induced an increase in inward and outward trade between the US and Canada, but also led to a significant reduction in sales of their foreign affiliates in the corresponding CUSFTA partner country. This outcome implies that the trade-generating effect of the CUSFTA is overstated. [ABSTRACT FROM AUTHOR]

While it has long been assumed that exchange-rate volatility introduces a level of uncertainty that helps reduce trade flows, this need not be the case for particular country pairs or for specific products. This study examines the case of trade between Canada and Mexico—two members of the highly integrated North American market. Trade flows are examined for a number of specific products using the “bounds testing” cointegration approach over the period from 1973 to 2006. Relatively few industries see a long-run reduction in trade volumes due to volatility. This indicates that multinational producers in these integrated markets might be able to hedge against exchange-rate risk. Since major Mexican exports appear to see the largest reductions, Mexico might have a stronger incentive to reduce the volatility of the peso. [ABSTRACT FROM AUTHOR]

This article investigates the nature of the causal linkage between stock markets and foreign exchange markets in Australia, Canada, Japan, Switzerland, and UK from January 1992 to December 2005. Recently developed cointegration tests are employed and no evidence of a long-run relationship between the variables is found. Three variations of the Granger causality test are carried out and causality from exchange rates to stock prices is found for Canada, Switzerland, and UK; weak causality in the other direction is found only for Switzerland. The Hiemstra-Jones test is used to examine possible non-linear causality and the results indicate causality from stock prices to exchange rates in Japan and weak causality of the reverse direction in Switzerland. [ABSTRACT FROM AUTHOR]