Trade Patterns, two parts (15 points; 10 min) How are the…
Trade Patterns, two parts (15 points; 10 min) How are the patterns of international trade, that is the pattern of what different countries export and import, explained? (Please discuss at least three determinants of trade, at length). Two basic models of international trade are the simple trade “openness” model and the gravity model. Please write the equations (as best you can, using parentheses to group variables that reside in the numerator. You may use numbers in place of subscripts – e.g., Y1 and Y2 to represent GDPs for country 1 and country 2) that represent both models, discuss the variables, what information they provide, and discuss important differences among the models. Importantly, what determinants of trade each might overlook.