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Information Frictions and the Law of One Price: "When the States and the Kingdom became United"
June 25, 2015Macro, Trade, and Finance Seminar Series

Claudia Steinwender (Princeton University) will share the results of recent research.

Speaker: Claudia Steinwender is IES Fellow at the International Economics Section at Princeton University. More »

Abstract: This paper exploits a unique historical experiment to estimate how information frictions distort international trade: the establishment of the transatlantic telegraph in 1866. I use newly collected data on cotton prices, trade and information flows from historical newspapers and find that the average and volatility of the trans-atlantic price difference fell after the telegraph, while average trade flows increased and became more volatile. I provide a trade model in which exporters use the latest news about a foreign market to forecast expected prices and estimate the efficiency gains the telegraph to be equivalent to 8% of export value.

This seminar is held jointly with the IMF.



Last Updated: Jun 22, 2015

The Macro, Trade, and Finance Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers from the fields of macroeconomics, growth, trade, international integration, and finance to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Event Details
  • Date: June 25, 2015
  • Location: World Bank Main Complex, MC4-100
  • Time: 12:30 - 2:00 p.m.
  • CONTACT: Shweta Mesipam
  • smesipam@worldbank.org