International trade
What was the US largest positive annual current account surplus since 1960, and in what year did this arise?
What was the US largest negative annual current account surplus since 1960, and in what year did this arise?
Write out the budget constraint for period 1 and a separate budget constraint for period 2.
Combine the two per-period budget constraints to form the intertemporal budget constraint.
Derive the consumer’s choice of consumption in the first period, , consumption in the second period, , and the amount of borrowing or lending b, as a function of y1, y2, and r.
Suppose that , , and . What is the interest rate, , in the closed economy? What is the value of ?
Suppose there is another country, (the foreign country) whose preferences are identical to those in the first part of this question. This country has endowments of y*2 = 6 and , and What is the interest rate in the closed foreign economy, ? What is the value of ?
When the home and foreign country open to trade, what will the world interest rate be?
Calculate the standard deviation (S.D.) of log qit, for each year in the period 2011-2016, across all countries and across the subset of countries that adopted the Euro, respectively. Did you observe any difference? Why? For these calculations, you will generate a dummy variable equal to one if the country belongs to the Euro zone, and equal to zero if it does not. To generate summary statistics, such as the S.D., you can use the command “sum” combined with the options “by” (by year), and “if” (whether the country belongs to the Euro zone or not).
Price levels are linked to the level of development of countries. Plot the real exchange rate constructed in d) against real GDP per capita (relative to the United States), for the year 2014. First, calculate real GDP per capita relative to US’s as “rgdpl” divide by “rgdpl_us” using the command “gen”. Then, use the graph command “scatter”. Make sure to include a title and clearly label the axis. What correlation should we observe between these two variables according to the theory?
