Question

Second time posting: Actual question is How would you structure the datasets to analyze this relationship? For some reason everyone discusses the trade and economic growth as if this is a writing class but Im just trying to figure out how to answer the question about analyzing the relationship with datasets. THANKS

Lets say you are interested in how levels of trade for countries influence economic growth. How would you structure the dataset to analyze this relationship

Answer 1

Ans.

- In a closed economy, all output Y is consumed or invested by the private sector— domestic households and businesses—or purchased by the government.

- Letting Y denote GDP, C private consumption, I investment, and G government purchases of goods and services, the national income identity for a closed economy is given by:

o Y = C + I + G

- Once foreign trade is introduced, however, some output is purchased by foreigners (exports) whereas some domestic spending is used for purchases of foreign goods and services (imports). The national income identity for an open economy is thus

o Y = C + I + G + X – M

o where X denotes exports and M denotes imports

- When a country’s imports exceed its exports, the current account is in deficit. When a country’s exports exceed its imports, the current account is in surplus. As the above Equation shows, a current account surplus or deficit can affect GDP

- So to study the impact of Foreign Trade on the economy of the country we will see key dataset such as :

o Export details by country / Import by country , Net effect surplus or deficit

o Foreign reserves

o Capital account transactions

o capital and financial accounts

o Foreign Debt

o Foreign Direct investment