Food Imports in a Gravity Model

This Project should be done individually.

  • It is worth 10 % of your totalgrade.
  • The goal of the project is to apply empirical methods taught in class to the analysis ofreal

world economic problems using properly collected secondary data.

 

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Food Imports in a Gravity Model

 

Economic theory of the Gravity model of trade suggests that the value of bilateral trade is determined by the distance between the two countries and the size of the economies of the trading partners. Your dependent variable is the value of food imports (FIMPORT) and your independent varies are distance (DISTANCE), GDP of Qatar (GDPQ) and GDP of the exporter (GDPE). Your task is to determine if Qatar’s food imports are explained by DISTANCE, GDPQ, and GDPE, in conformity with the above- mentioned economic theory of trade.

 

 

The dataset is provided on Blackboard. It is titled Project Dataset.Please download.

 

 

Required Tasks:

 

Part A

 

Provide an introductory paragraph reflecting your understanding of the theory and the objectives of the

project.

 

Draw a scatter diagram of the data. Comment on whether it appears that a linear model might be appropriate.

 

Part B

 

Estimate the regression model using E-views or STATA software to get the coefficients and the standard error for each coefficient.

 

Interpret the values of the slope coefficients.

 

What does the standard error of the estimate tell you about the regressionmodel. Interpret the coefficient of determination. What does it tell you about the model.

Determine whether FIMPORT is explained by DISTANCE, GDPQ, and GDPE, as the relevant economic theory suggests. Properly explain your answer.

 

Plot the necessary graphs to check the required conditions about the error terms:

  • Draw a histogram of the residuals. Does it appear that the errors are normallydistributed?

Explain your answer.

  • Plot the residuals against the predicted values of y. Does it appear that heteroscedasticity is a problem or not? Explain youranswer.

 

 

Part C

Prepare a separate 2-page statement summarizing ALL of your analysis. Based on your analysis, provide recommendations on whether Government of Qatar should import food from large or small economies, and whether food should be imported from countries that are near or far.

 

Note: The report should contain a cover page (title, name, ID # of the student, and course number.

 

The Evaluation Process:

  • This is an individualproject.

 

  • Student projects will be evaluated based on different criteria, including ability to follow instructions and the quality of yourwork.

 

  • A well-structured report answering all questions must be submitted to the instructor as asafe

assignment and as hard copy. NO email submissions will be accepted or acknowledged.

  • Any work submitted after the due date will receive a penalty of 10% per daylate. Please NOTE that all PLAGIARISEDwork will receive a score ofZero.