Essays in international trade

Gravity equation estimation is the unifying theme of this dissertation. Chapter One analyses the world's system of fixed exchange rate regimes. Two clients pegging to the same anchor indirectly stabilise their bilateral exchange rates. Modelling exchange rates arrangements as a network formalises these spillovers and generates a measure of exchange rates' stability, for both individual currencies and the global system. This stability measure is used as an instrument for countries' bilateral exchange rate regimes in a gravity equation. IV estimates of the effect of the regimes on trade are dramatically lower than OLS estimates.;Chapter Two also explores the relationship between fixed exchange rates and trade, using the formation of the euro as a natural experiment. 32 countries fixed their currencies against the DM or FFr prior to the formation of the euro, and have continued to fix against the euro since 1999. On the euro's formation these countries came to adopt a fixed exchange rate against the other Eurozone members in addition to their original anchor. These 'exogenous' changes in exchange rate regime yield significantly lower estimates of the effect of a peg on trade than the full set of pegs. Standard estimates may be inflated by countries' tendency to select into a fixed exchange rate regime with a major trading partner.;Chapter Three suggests a modification to a new technique for estimating the gravity equation. Some widely used trade databases do not distinguish between zero and unreported trade flows. The number of unreported trade flows is high but they account for a small volume of world trade, so the distinction may be unimportant for traditional gravity equation estimation. However, techniques that separately estimate the intensive and extensive margins of trade may be more sensitive to the distinction. This paper develops a methodology to consistently estimate the Helpman, Melitz and Rubinstein model when some trade is unreported. This also breaks the relationship between the sample selection and heterogeneity correction terms, reducing collinearity of the regressors. A natural exclusion restriction identifies the model, removing the need to distinguish fixed from variable costs of trade.