Stuck on Gold: Real Exchange Rate Volatility and the Rise and Fall of the Gold Standard

Did adoption of the gold standard exacerbate or diminish macroeconomic volatility? Supporters thought so, critics thought not, and theory offers ambiguous messages. A hard exchange-rate regime such as the gold standard might limit monetary shocks if it ties the hands of policy makers. But any decision to forsake exchange-rate flexibility might compromise shock absorption in a world of real shocks and nominal stickiness. A simple model shows how a lack of flexibility can be discerned in the transmission of terms of trade shocks. Evidence on the relationship between real exchange rate volatility and terms of trade volatility from the late nineteenth and early twentieth century exposes a dramatic change. The classical gold standard did absorb shocks, but the interwar gold standard did not, and this historical pattern suggests that the interwar gold standard was a poor regime choice.

Trade Booms, Trade Busts, and Trade Costs

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs.

Merlin Phosphorylation by p21-activated Kinase 2 and Effects of Phosphorylation on Merlin Localization

The Nf2 tumor suppressor gene product merlin is related to the membrane-cytoskeleton linker proteins of the band 4.1 superfamily, including ezrin, radixin, and moesin (ERMs). Merlin is regulated by phosphorylation in a Rac/cdc42-dependent fashion. We report that the phosphorylation of merlin at serine 518 is induced by the p21-activated kinase PAK2. This is demonstrated by biochemical fractionation, use of active and dominant-negative mutants of PAK2, and immunodepletion. By using wild-type and mutated forms of merlin and phospho-directed antibodies, we show that phosphorylation of merlin at serine 518 leads to dramatic protein relocalization. Neurofibromatosis type 2 (NF2)1 is an inherited disorder characterized by the development of Schwann cell tumors of the eighth cranial nerve. Mutations and loss of heterozygosity of theNF2 gene have been detected in NF2 patients and in various sporadic tumors, including schwannomas, meningiomas, and ependymomas (1). In further support of a role for NF2 in tumor suppression, mice heterozygous for an Nf2 mutation are predisposed to a wide variety of tumors with high metastatic potential (2). In a separate model in which Nf2 is inactivated specifically in Schwann cells, mice develop schwannomas and Schwann cell hyperplasia (3). The longest and predominant splice form of the Nf2gene codes for a 595-amino acid protein highly similar to the band 4.1 family of proteins. It is most closely related to the ERM proteins,moesin, ezrin, and radixin. The ERM proteins are thought to function as cell membrane-cytoskeleton linkers and are localized to cortical actin structures near the plasma membrane such as microvilli, membrane ruffles, and lamellipodia (4, 5). Likewise, merlin is localized to cortical actin structures, in patterns that partially overlap with the ERMs (1). It has been proposed that intramolecular binding of the N-terminal and C-terminal domains conformationally regulates the ERM proteins by masking binding sites for interacting proteins. The ERMs can also form homodimers and heterodimers, among themselves and with merlin, adding an additional level of complexity to the regulation of these proteins (6). The recently solved crystal structure of the moesin N/C-terminal complex strengthens this model of conformational regulation (7). Given the sequence and, most likely, structural similarities of merlin to the ERM proteins, it is possible that merlin itself could be regulated in a similar fashion. Recent studies (8, 9) have implicated additional factors in the regulation of the ERMs, including phospholipids and phosphorylation. Previous work from our group and others (10, 11) has shown that merlin is differentially phosphorylated as well and that merlin protein levels are affected by growth conditions such as cell confluency, loss of adhesion, or serum deprivation. Merlin is found in an hypophosphorylated form when the combination of cellular and environmental conditions are growth-inhibitory (10). ERMs can be phosphorylated by Rho kinase, and this phosphorylation can affect intramolecular association and cellular localization. Phosphorylation and/or phospholipids may promote the transition of the proteins to an active form by “opening” intra- and intermolecular associations. These active monomers can then bind to other interacting proteins and the actin cytoskeleton and induce actin-rich membrane projections (5,8, 12, 13). The induction of merlin phosphorylation by activated alleles of the Rho family GTPases has also been examined. Interestingly, although activated Rho did not induce noticeable phosphorylation of merlin, activated forms of Rac and cdc42 did. The site of Rac-induced phosphorylation was determined to be a serine at position 518; mutation of serine 518 results in reduced basal phosphorylation and eliminated Rac-induced phosphorylation (11). Although Rac and cdc42 are implicated in the regulation of many pathways, they are most associated with regulation of cytoskeleton reorganization and gene expression (for recent reviews see Refs.14-16). In light of the data demonstrating that activated Rac/cdc42 leads to phosphorylation and possible inactivation of merlin, the elucidation of the responsible effector pathways and their effects on merlin function are of major importance. Understanding this regulation of merlin could lead to a more complete appreciation of the effects of merlin loss in tumors

Trade costs, 1870–2000

What has driven trade booms and trade busts in the past century and a half? Was it changes in global output or in the costs of international trade? To address this question, we derive a micro-founded measure of aggregate bilateral trade costs based on a standard model of trade in differentiated goods. These trade costs gauge the difference between observed bilateral trade and frictionless trade in terms of an implied markup on retail prices of foreign goods. Thus, we are able to estimate the combined magnitude of tariffs, transportation costs, and all other macroeconomic frictions that impede international trade but that are inherently difficult to observe. We use this measure to examine the growth of global trade between 1870 and 1913, its retreat from 1921 to 1939, and its subsequent rise from 1950 to 2000. We find that trade cost declines explain roughly 55 percent of the pre–World War I trade boom and 33 percent of the post–World War II trade boom, while a precipitous rise in trade costs explains the entire interwar trade bust

Trade booms, trade busts and trade costs

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs

Defying Gravity: The 1932 Imperial Economic Conference and the Reorientation of Canadian Trade

In the wake of the Great Depression, the Canadian government embarked on a stunning reversal in its commercial policy. A key element of its response was the promotion of intra-imperial trade at the Imperial Economic Conference of 1932. This paper addresses whether or not Canadian trade was able to defy gravity and divert trade flows towards other signatories at Ottawa. The results strongly suggest that the conference was a failure from the Canadian perspective. Potential sources of this failure include unreasonable expectations about the likely reductions in trade costs and a neglect of key considerations related to certainty and credibility.

On the Death of Distance and Borders: Evidence from the Nineteenth Century

In this paper, we investigate time-dependent border and distance effects in the nineteenth century and document clear declines in the importance of these variables through time. What this suggests, in light of the work for the post-1950 era, is that researchers might have correctly identified the increasing effect of distance on bilateral trade over time. In other words, trade costs may have not declined nearly as dramatically in the late twentieth century as has been supposed, especially in light of the nineteenth century, a time of documented trade cost decline and commodity market integration.

Foreign Wars, Domestic Markets: England, 1793-1815

This paper explores the means by which warfare influences domestic commodity markets. It is argued that England during the French Wars provides an ideal testing ground. Four categories of explanatory variables are taken as likely sources of documented changes in English commodity price dis-integration during this period: weather, trade, policy, and wartime events. Empirically, increases in price dispersion are related to all of the above categories. However, the primary means identified by which warfare influenced domestic commodity market integration was through international trade linkages and the arrival of news regarding wartime events.

Trade Booms, Trade Busts and Trade Costs

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs

Trade costs in the first wave of Globalization

What drives globalization today and in the past? We employ a new micro-founded measure of bilateral trade costs based on a standard model of trade in differentiated goods to address this question. These trade costs gauge the difference between observed bilateral trade and frictionless trade. They comprise tariffs, transportation costs and all other factors that impede international trade but which are inherently difficult to observe. Trade costs fell on average by ten to Þfteen percent between 1870 and 1913. We also use this measure to decompose the growth of global trade over that period and Þnd that roughly 44 percent of the global trade boom can be explained by reductions in trade costs; the remaining 56 percent is attributable to economic expansion