The home bias in trade puzzle is a widely discussed problem in macroeconomics and international finance, first documented by John T. McCallum in an article from 1995.[1]
McCallum showed that for the United States and Canada, inter-province trade is 20 times larger than international trade, holding other determinants of trade fixed. Subsequent estimates by John F. Helliwell and others have whittled this bias down to a factor from 6 to 12.[2] This home bias in trade has later been documented among OECD countries.[citation needed] The preferred explanation for this finding has been the presence of formal and informal trade barriers following national borders. Another possible solution to the fact that domestic trade is 20 times larger than international trade could be that domestically traders speak the same language.
If presence of formal and informal trade barriers following national borders was the sole reason for this puzzle, home bias should not exist on the subnational level. Wolf (2000)[3] finds, however, that home bias is present also within U.S. states.
^McCallum, John (1995). "National Borders Matter: Canada-U.S. Regional Trade Patterns". The American Economic Review. 85 (3): 615–623. JSTOR 2118191.
^Helliwell, John F. (1996). "Do National Borders Matter for Quebec's Trade?" (PDF). Canadian Journal of Economics. 29 (3): 507–522. doi:10.2307/136247. JSTOR 136247. S2CID 153603065.
^Obsfeld, Maurice; Rogoff, Kenneth (2000), "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?" (PDF), in Bernanke, Ben; Rogoff, Kenneth (eds.), NBER Macroeconomics Annual 2000, vol. 15, The MIT Press, pp. 339–390, ISBN0-262-02503-5
April 14, 2024
home, bias, trade, puzzle, home, bias, trade, puzzle, widely, discussed, problem, macroeconomics, international, finance, first, documented, john, mccallum, article, from, 1995, mccallum, showed, that, united, states, canada, inter, province, trade, times, lar. The home bias in trade puzzle is a widely discussed problem in macroeconomics and international finance first documented by John T McCallum in an article from 1995 1 McCallum showed that for the United States and Canada inter province trade is 20 times larger than international trade holding other determinants of trade fixed Subsequent estimates by John F Helliwell and others have whittled this bias down to a factor from 6 to 12 2 This home bias in trade has later been documented among OECD countries citation needed The preferred explanation for this finding has been the presence of formal and informal trade barriers following national borders Another possible solution to the fact that domestic trade is 20 times larger than international trade could be that domestically traders speak the same language If presence of formal and informal trade barriers following national borders was the sole reason for this puzzle home bias should not exist on the subnational level Wolf 2000 3 finds however that home bias is present also within U S states Maurice Obstfeld and Kenneth Rogoff identify this as one of the six major puzzles in international economics 4 The others are the Feldstein Horioka puzzle the equity home bias puzzle the consumption correlations puzzle the purchasing power and exchange rate disconnect puzzle and the Baxter Stockman neutrality of exchange rate regime puzzle References edit McCallum John 1995 National Borders Matter Canada U S Regional Trade Patterns The American Economic Review 85 3 615 623 JSTOR 2118191 Helliwell John F 1996 Do National Borders Matter for Quebec s Trade PDF Canadian Journal of Economics 29 3 507 522 doi 10 2307 136247 JSTOR 136247 S2CID 153603065 Wolf Holger C 2000 Intranational Home Bias in Trade Review of Economics and Statistics 82 4 555 563 doi 10 1162 003465300559046 S2CID 57559307 Obsfeld Maurice Rogoff Kenneth 2000 The Six Major Puzzles in International Macroeconomics Is There a Common Cause PDF in Bernanke Ben Rogoff Kenneth eds NBER Macroeconomics Annual 2000 vol 15 The MIT Press pp 339 390 ISBN 0 262 02503 5 Retrieved from https en wikipedia org w index php title Home bias in trade puzzle amp oldid 1199176032, wikipedia, wiki, book, books, library,
