Exports and economic growth
I was looking to show a more substantive piece of analysis using the World Development Indicators data, and at the same time show how to get started on fitting a mixed effects model with grouped time series data. The relationship between exports’ importance in an economy and economic growth forms a good start as it is of considerable theoretical and practical policy interest and has fairly reliable time series data for many countries. At the most basic level, there is a well known positive relationship between these two variables:
The relationship is made particularly strong by the small, rich countries in the top right corner. Larger countries, with their own large domestic markets, can flourish economically while being less exports-dependent than smaller countries – the USA being the example par excellence. If the regression is weighted by population, the relationship is much weaker than shown in the above diagram.
However, today, I’m looking at a different aspect of the relationship – changes over time. Partly this is because I’m genuinely interested, but mostly because I needed an example demonstrating fitting a mixed effects model to longitudinal data with a time series component.
The data come from the World Bank’s World Development Indicators (WDI), which I explored recently in my last post. I’m comparing “Exports of goods and services (% of GDP)” with “GDP per capita (constant 2000 US$)”. The WDI have at least some data on these variables for 186 countries, but different starting years for each (earliest being 1962). The data look like this, in a connected scatterplot showing the relationship between the two variables for 12 randomly chosen countries:
… and this, in a more straightforward time series line plot:
Close watchers will see that there are some …read more
Source:: r-bloggers.com