Effect Of Globalization On Canada's International Trade Pattern
Canada’s International Trade Pattern
Final Draft
April 2013
Introduction
Canada with per capita GDP of US$ 42, 734 (PPP adjusted) is ranked 9th in the world, according to the IMF WEO estimates. The total size of Canada’s economy, as of 31 March 2012, stands at US$ 1,446 billion (PPP) (Cheung, 2009) as per IMF figures and ranked at 13 in the world. The country’s merchandise trade rebounded after 5 years of slump and has been in the growth path since 2010. The reversal had been bolstered by better consumer preference for Canadian products globally. The exports (merchandise) expanded to $399.4 billion (2010) while for imports; the figure touched $403.3 billion. However, there is a pitfall in Canada’s trading pattern. It is heavily concentrated …show more content…
It is advocated in gravity equation that common borders enhances trade between the two nations. We will find how much the sharing borders of Canada with USA impacted in their trade volume.
Distance and Globalization
It will be ascertained whether distance is still a major factor for trade levels or whether the effect of globalization has narrowed it down.
The Effect of Comparable GDP
It is interpreted in Gravity Model that countries with comparable GDPs enhances trade. For instance, Canada, being an advanced economy, tends to export more with other advanced economies. And if the GDP of the advanced economies increases the export of Canada is likely to increase as well. And if the trade takes place between a rich and poor country, for example between Canada and India, it will be marked by comparative advantage of one way or the other. Therefore, the gravity equation suggests that there is chance of biasness in trade practices among countries of same income classes.
Now let’s get down to business and find out how the Gravity Equations work in different …show more content…
Estimates
Regression Statistics | Multiple R | 0.178146 | R Square | 0.031736 | Adjusted R Square | -0.02359 | Standard Error | 1.118935 | Observations | 38 |
ANOVA | | | | | | | df | SS | MS | F | Significance F | Regression | 2 | 1.436265 | 0.718133 | 0.573582 | 0.568711 | Residual | 35 | 43.82051 | 1.252015 | | | Total | 37 | 45.25677 | | | |
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | Intercept | -2.07874 | 27.61286 | -0.07528 | 0.940419 | -58.1358 | 53.97835 | -58.1358 | 53.97835 | ln GDP | -1.17742 | 3.185901 | -0.36957 | 0.713927 | -7.64515 | 5.290298 | -7.64515 | 5.290298 | ln Population | 3.728524 | 14.27113 | 0.261263 | 0.795421 | -25.2434 | 32.70046 | -25.2434 | 32.70046 |
Assumptions: | | | | | | Trade volume is taken as the ratio of the Export and Import | | The Export origin is shifted by 15; the import origin is shifted by 18 | There is no influence of distance | | | | Other factors are covered in the error term | |
Final Draft
April 2013
Introduction
Canada with per capita GDP of US$ 42, 734 (PPP adjusted) is ranked 9th in the world, according to the IMF WEO estimates. The total size of Canada’s economy, as of 31 March 2012, stands at US$ 1,446 billion (PPP) (Cheung, 2009) as per IMF figures and ranked at 13 in the world. The country’s merchandise trade rebounded after 5 years of slump and has been in the growth path since 2010. The reversal had been bolstered by better consumer preference for Canadian products globally. The exports (merchandise) expanded to $399.4 billion (2010) while for imports; the figure touched $403.3 billion. However, there is a pitfall in Canada’s trading pattern. It is heavily concentrated …show more content…
It is advocated in gravity equation that common borders enhances trade between the two nations. We will find how much the sharing borders of Canada with USA impacted in their trade volume.
Distance and Globalization
It will be ascertained whether distance is still a major factor for trade levels or whether the effect of globalization has narrowed it down.
The Effect of Comparable GDP
It is interpreted in Gravity Model that countries with comparable GDPs enhances trade. For instance, Canada, being an advanced economy, tends to export more with other advanced economies. And if the GDP of the advanced economies increases the export of Canada is likely to increase as well. And if the trade takes place between a rich and poor country, for example between Canada and India, it will be marked by comparative advantage of one way or the other. Therefore, the gravity equation suggests that there is chance of biasness in trade practices among countries of same income classes.
Now let’s get down to business and find out how the Gravity Equations work in different …show more content…
Estimates
Regression Statistics | Multiple R | 0.178146 | R Square | 0.031736 | Adjusted R Square | -0.02359 | Standard Error | 1.118935 | Observations | 38 |
ANOVA | | | | | | | df | SS | MS | F | Significance F | Regression | 2 | 1.436265 | 0.718133 | 0.573582 | 0.568711 | Residual | 35 | 43.82051 | 1.252015 | | | Total | 37 | 45.25677 | | | |
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | Intercept | -2.07874 | 27.61286 | -0.07528 | 0.940419 | -58.1358 | 53.97835 | -58.1358 | 53.97835 | ln GDP | -1.17742 | 3.185901 | -0.36957 | 0.713927 | -7.64515 | 5.290298 | -7.64515 | 5.290298 | ln Population | 3.728524 | 14.27113 | 0.261263 | 0.795421 | -25.2434 | 32.70046 | -25.2434 | 32.70046 |
Assumptions: | | | | | | Trade volume is taken as the ratio of the Export and Import | | The Export origin is shifted by 15; the import origin is shifted by 18 | There is no influence of distance | | | | Other factors are covered in the error term | |