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Correlation between bilateral trade volume

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Reference no: EM133084299

The gravity model of trade predicts that the volume of trade between two countries is positively related to the size of the two economies. To examine this relationship, find the top 20 trading partners for any ONE of the following five countries: Brazil, Colombia, Bolivia, Argentina and Ecuador; and then find the value of export (for the country of your choice) to each trading partner as well their GDPs for the year 2013.

Use Microsoft Excel or any other spreadsheet program to make a scatter plot that focuses on size (GDP) as a determinant of trade. The figure should have GDP (as a per cent of the GDP of all top 20 export destinations) on the horizontal axis, and exports (as a per cent of the exports to all top 20 export destinations) on the vertical axis.

Explain whether your scatter plot shows any correlation between bilateral trade volume and the size of an economy as predicted by the gravity model of trade.

Note: As data on exports are in millions, convert the GDPs into millions as well.

Data: Go to the International Monetary Fund site at https://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85&sId=1514498277103 to find the volume of export to each of the top 20 trading partners of your selected country. If you click on the name of the first country for which export data is shown on this link, you will see a drop-down menu for list of countries on which data is available. Select the country of your choice from this list and the appropriate year (2013) shown at the bottom of the data table.

To find data on GDP, go to the World Bank Web site at https://data.worldbank.org/. Select GDP in current $US in the navigation field "Find an Indicator". This will lead you to the page with GDP data for all countries. Collect GDP data for the trading partners of your selected country and make sure you are choosing the appropriate year (2013).

Reference no: EM133084299

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