In this problem, consider trade between the US and some European countries and draw figure similar to the one presented on slide 38 of Lecture 6. Go to the website with trade

statistics from Eurostat at http://ec.europa.eu/eurostat/web/international-trade-in-goods/

data/database and find data series EU Trade Since 1988 By CN8 (series code DS-016890). Download

the data on imports to the US and exports from the US to 27 EU countries in 2019. In

order to get this data you will need to customize the selection. Choose IMPORT and EXPORT as

FLOW, VALUE_IN_EUROS as INDICATORS, US (United States) as PARTNER, 201952 (Jan.-

Dec. 2019) as PERIOD, TOTAL (Total) as PRODUCT.

Next download the data on GDP in 2019 for the same 27 EU countries from Eurostat. Specifically,

go to http://ec.europa.eu/eurostat/web/national-accounts/data/database and find

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the series GDP and main components (output, expenditure and income) - (series code nama_10_gdp).

Using the Data explorer select the 27 individual EU counties as GEO, B1GQ (Gross domestic product

at market prices) as NA_ITEM, 2019 as TIME, and CP_MEUR (Current prices, million euro)

as UNIT. Convert the trade flows to millions of euros to make them denominated in the same units

as GDP. Then plot the natural logarithm of exports from the US against the natural logarithm

of GDP of the importing country. Plotting logarithms rather than levels makes figures easier to

read when plotted quantities cover a wide range of numbers. In a separate figure, plot the natural

logarithm of imports to the US against the natural logarithm of GDP of the exporting country.

How would you use those figures to judge whether the gravity equation accounts well for bilateral

trade between the US and European countries?