1. Critically assess the Heckscher-Ohlin model of trade and discuss how this model explains the phenomenon of inter-industry trade. Are the implications of this model consistent with the empirical observations? (Give examples to illustrate your answer).
2. Distinguish between external and internal economies of scale and use these concepts to explain the phenomenon of intra- industry trade. How might intra-industry trade be expanded?
3. Use recent Eurostat data to examine the extent and the pattern of intra-industry trade within the Eurozone trading area. What are the implications of your analysis for trade creation within this trading zone?
(Note: you need to use relevant data to calculate various IIT indices).
4. Explain what you understand by “an optimum currency area”. Is Euro-zone an optimal currency area?
Provide a critical assessment with a close reference to the key theoretical and empirical indicators, including your analysis of the extent and the pattern of intra-industry trade within the Euro-zone trading area in Q. 3 above, and an analysis of the extent of labour mobility within the Euro-zone trading area.
Guidance and Preparation notes.
This assignment requires a focused answer to each question within the overall total word limit of (3000-4000 approx.), excluding tables, graphs and appendices.
Your assignment should include:
· Explanation and the use of relevant international trade theories and empirical evidence to support discussion in all parts.
· Collection, presentation and analysis of relevant international trade data from key international data sources ( e.g .EuroStat, IMF ,WTO) to provide empirical support to discussion. Eurostat data is essential and is required for answering Q.3.
· Integration of theoretical discussion with relevant evidence and data collected and presented in the form of tables and graphs to arrive at an appropriate conclusion.
