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Common currency dummy should be zero with the same pair country?
Common currency dummy should be zero with the same pair country?

Hello to everyone.

I am working in a gravity model with 133 countries from 2005 to 2018 and I am estimating it with PPML.

My question is: Should Common currency dummy be 0 or 1 with the same pair country? i.e. AFG - AFG = 0 or AFG - AFG = 1

This question arise because I have been reading some related papers where Common currency dummy is included. In all of them its result is positive.

In my gravity model, Common currency dummy got a coefficient of -0.57 and I think it may be because pair countries has 1 instead of 0 in the Common currency dummy. It is right?

Kind regards.

Carlos.

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Common currency dummy should be zero with the same pair country?

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