Dear all.
I am working in a gravity model with a large number of observations (133 exporters and 133 importers countries from 2005 to 2018).
My dependant variable is bilateral exports from i to j. I got this data from the IMF databank and their values are in current USD, as it is usual in many papers. However, some referees in an economic journal told me that I must work with exports at constant values.
I have tried to get the bilateral exports at constant values from different databanks but it has not been possible. Another possibility is to deflate every flow through an export price index related to each country involved in the study, but it would be a hard and long job. Therefore, I have some questions for you:
1. Why many papers estimate its model with bilateral exports at current USD values and their results are fine although they do not include exports at constant prices?
2. In case I decided to estimate my model with bilateral exports at current values, how can I justify this?
3. The inclusion of a year dummy creates a similar effect to the deflation process over exports values?
4. There is any available databank where I can find bilateral exports at constant values?
Thank you in advance.
Kind regards.
Carlos.
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