builds a new dataset on trade-weighed exchange rates for the period 1870-1913 and finds that large currency movements in … exchange rates worldwide. We relate the phenomenon to the international trade structure at the time and show that such currency … fluctuations had powerful effects on trade flows. We conclude that nominal exchange rate flexibility in the periphery was an …

subject to random shocks affecting endowments, the terms of trade, and the real interest rate. Equilibrium stochastic … mimics the Harberger-Laursen-Metzler effect, but cannot account for a countercyclical trade balance, the variability of the … real exchange rate, and the income elasticity of imports. The results also show that the correlation between the trade …