The website address of the Bureau of Economic Analysis is www.bea.gov.

1.

Use this website to assess recent trends in exporting and importing by U.S. firms. How has the balance of trade changed over the last 12 months?

2.

Offer possible reasons for this change in the balance of trade.

3.

Go to www.census.gov/foreign-trade/balance/ and obtain monthly balance-of-trade data for the last 24 months between the United States and the United Kingdom or a country specified by your professor.

Create an electronic spreadsheet in which the first column is the month of concern, and the second column is the trade balance. (See Appendix C for help with conducting analyses with Excel.) Use a compute statement to derive the percentage change in the trade balance in the third column. Then go to www.oanda.com/convert/fxhistory. Obtain the direct exchange rate (dollars per currency unit) of the British pound (or the local currency of the foreign country you select).

Obtain the direct exchange rate of the currency at the beginning of each month and insert the data in column 4. Use a compute statement to derive the percentage change in the currency value from one month to the next in column 5. Then apply regression analysis in which the percentage change in the trade balance is the dependent variable and the percentage change in the exchange rate is the independent variable.

Is there a significant relationship between the two variables? Is the direction of the relationship as expected?

If you think that the exchange rate movements affect the trade balance with a lag (because the transactions of importers and exporters may be booked a few months in advance), you can reconfigure your data to assess that relationship (match each monthly percentage change in the balance of trade with the exchange rate movement that occurred a few months earlier).