Answer to Question #214161 in Macroeconomics for Anisha Radhika Kum

Question

Use excel

Assume you work as an Economist for the Ministry of Sugar Exports and provided the following data on sugar exports earnings ($USD millions). Year Sugar Exports Year Sugar Exports Year Sugar Exports 1980 10048 1991 10003 2002 9954 1981 10050 1992 9998 2003 9949 1982 10046 1993 9995 2004 9944 1983 10042 1994 9990 2005 9939 1984 10040 1995 9985 2006 9934 1985 10032 1996 9980 2007 9929 1986 10034 1997 9975 1987 10026 1998 9971 1988 10021 1999 9966 1989 10013 2000 9961 1990 10008 2001 9959 a) Based on the information provided, determine the appropriate model that will fit the data well. State any assumptions you make. b) Based on your model in part a) above, forecast the sugar export earnings for the period 2008-2010.

Answer 1

A) Based on the information provided we can take the gravity model of trade to fit this data. The assumptions made are that the trade is made to newer and far off places every year, which is why the gravity model is used as in this approach the exports fall every year due to the rising distance.

B) The exports for years 2008-2010 will be

2008: 9924

2009:9919

2010:9914