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homework 7 eco




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#55815 | Written in 18-Jul-2015

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