Reference no: EM132265956

International Trade Assignment -

INTRODUCTION - Assume that you are an economic consultant hired by an international organization/government to provide your expert advice on conditions pertaining to international trade in Italy and Sweden. Your analysis will consist of two separate reports (one for Assignment 1 and the other for Assignment 2). As an expert, your job is two-fold:

1. You are required to analyse any relevant issue using your technical skills. This involves utilizing your knowledge in international trade models as well as inspecting and interpreting data.

2. You need to communicate your results in an effective way.

The purpose of this exercise is to assess your aptitudes in each domain. You will evaluate the trading conditions in these countries (Italy and Sweden) based on the scenarios detailed in each question in this Assignment. Your analysis will form the basis for a short report to the international organization/government body---summarising your analysis and the associated rationale.

DATA SOURCE - For your data analysis, you first need to obtain data from the World Bank and follow the steps described below. Notice that World Bank regularly updates its database; therefore it is crucial to obtain all data as soon as possible. The data range is from 2003 to 2015.

You need to obtain the country-level data for Italy and Sweden on:

i. Imports of goods and services (in current US$)

ii. Exports of goods and services (in current US$)

iii. GDP (in current US$)

iv. GDP per capita (in current US$)

v. GINI Index (World Bank estimate) from the World Bank's World Development Indicators.

REQUIRED TASKS - Your tasks involve two dimensions. Firstly, you need to analyse the data (see Steps 1, 2 and 3 in the next section). Secondly, you need to perform a technical analysis by considering a hypothetical trading environment based on Ricardian model (see Step 4 in the next section).

Accordingly, you are required to:

• Provide information about how integrated these two countries (Italy and Sweden) are with the rest of the world. To do so, you need to look at their trade flows relative to their GDP and calculate openness.
• Provide a visual representation of your findings by plotting a graph that shows the change in openness for these countries over the time period between 2003 and 2015.
• Establish whether being integrated with the rest of the world helped these two countries by looking at the correlation between their openness and GDP per capita.
• Conjecture what would have happened if these countries were not open to trade with the rest of the world by evaluating a hypothetical scenario based on a simple Ricardian model.

REQUIRED STEPS TO COMPLETE EACH TASK -

DATA ANALYSIS - For data analysis, you need to follow Steps 1, 2 and 3 given below.

Step 1. Using trade flows in your data, calculate openness as a percentage for Italy and Sweden and present them for each year for both countries as a table. You need to explain your method, namely, how you calculated openness using trade flows (write down the formula). In addition, you need to state what other alternative ways you could have adopted to calculate openness other than using trade flows.

Step 2. Using the calculations you did for openness in Step 1, plot openness (as a percentage) against time (2003-2015) for both countries (Italy and Sweden) in a single graph. Put openness (as a percentage) on the vertical axis and time on the horizontal axis. Explain and compare briefly how openness changes for these countries over time. Make sure you limit your explanation to 200 words.

Step 3. Explain in up to 200 words the relationship between openness and economic development by calculating the correlation coefficient between GDP per capita (proxy for economic development) and openness for each of the two countries, respectively. [Here you have to use the CORREL command in Excel]. DO NOT ATTACH YOUR DATA.

TECHNICAL ANALYSIS - For technical analysis, you need to follow Step 4.

Step 4. In order to conjecture the circumstances in these two countries under autarky (when there is no trade), consider the following hypothetical scenario based on Ricardian model. Assume throughout that those two countries (Italy and Sweden) are the only two countries in the world, at least for purposes of trade. There are two goods: shoes and calculators. Consumers in both countries always spend half of their income on shoes and half of their income on calculators. The only factor of production is labour. Each Italian worker can produce 1 shoe or 2 calculators per unit of time. Each Swedish worker can produce 4 shoes or 2 calculators per unit of time. There are 80 workers in Italy and 60 workers in Sweden. You need to provide conditions in each country by stating:

a) Which country has an absolute advantage in shoes? In calculators?

b) Which country has a comparative advantage in shoes? In calculators?

c) Draw the production possibility frontier for each country and indicate slope (put shoes on the vertical axis and calculators on the horizontal axis).

d) Find the autarky relative price of calculators in both countries (i.e., the price of calculators divided by the price of shoes).

e) What is the optimal consumption and production for each country under autarky?

Note - The questions are bring mentioned in the assignment sheet about Nigerian economy, it's about calculations.

Attachment:- Assignment Files.rar