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Economics problems Assignment Set.....................




Question;Objective;and Instructions:The;main objective of this assignment is to evaluate your understanding of the;course objectives: quantifying economic relationships, interpreting quantified;relationships, and formulating appropriate policy recommendations. To this end;you are being provided with data on US trade (exports) with 175 countries during;the years 2007 and 2008 (Worksheet-1 in the excel file) and descriptions of the;corresponding variables (Worksheet-2). Read the background presented below and;answer the four questions that follow. Each question carries 10 points. The;clarity and organization of your answers will earn you additional 10 points.;The problem: the classical theory of international;trade shows that higher purchasing power, and the market;size of a given country the higher is the number of firms (companies) interested;to do business in the given country. The purchasing power and market size of;the trading partner countries are thus expected to have positive effect on the;volume of US exports to the respective countries. On the contrary, greater;geographic distance (indicating higher shipping costs), higher levels of;corruption, and greater cost of living (as measured by the level of inflation) in;the given country are expected to have a negative effect on the total volume of;trade with the given country. Empirical studies of the role of immigrants in;international trade also show by bridging cultural differences, immigrants increase;the volume of bilateral trade flows between their home and host countries. Two;additional dummy variables, D1 taking value of 1 if the reference period is;2007 and 0 otherwise, and D2 taking a value of 1 if the given home country is;an OECD member and 0, otherwise are also included. The year dummy is included;to control for potential year to year fluctuation of trade flow values. The;OECD membership dummy is included to account for the potential effect of the similarity;in the economic development status of the countries. Given that the data refers;to US export with the rest of the world, it is expected that given their close;ties resemblance in their economic development with USA, compared to countries;that are no OECD members, countries that are members to OECD are expected to;trade more with USA.;The;Econometric Model:To;empirically assess these assertions, I want you to estimate the following log-linear;regression model using the data provided to you (Excel Data, Course Page).;1. Provide an appropriately;formatted descriptive statistics table of the variables (in original units);in the data and a brief discussion of the;descriptive stats so that readers can have a better understanding the;general characteristics of US trade flows and geographic as well as economic;conditions its trading partners. Be brief and to the point. [This;question is designed to assess your knowledge of computing descriptive stats;and your ability to make use of them.];2. Estimate the model, present your results and the corresponding;statistics (appropriately formatted and labeled) in the form of a table while;also indicating the level of significance of each variable included in the;model.;[This question is designed to;assess your ability quantify economic relationships based on real world data.];3.;Discuss the overall performance of the model and interpret the coefficient estimates accordingly. [This question is designed to assess your;ability to interpret quantified relationships, and the appropriateness of;specified relationships.];4.;In order to increase US;economic growth, the president and congress agree on the importance of;increasing US exports. Given the results you reported above, what policy advice;would you suggest (on what they should do) for policy makes interested to;increase US exports. [This question is designed to assess your;ability to formulate policy recommendations based quantified economic;relationships.]


Paper#55480 | Written in 18-Jul-2015

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