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Denmark Gravity Model Analysis

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Denmark is the 39th largest economy of the World. Due to the being one of the strongest economies of Europe, Denmark has mixed economy which made up of mostly related on human resources, oil and gas wells on North Sea and agricultural goods production. The GDP of Denmark is 60,268 USD per capita and the amount of people living is 5.7 million people. For analyzing the connection between Denmark and its biggest trade partners, we apply the Gravity model. The formula of Gravity Model is Fij=G*Mi*Mj/Dij
Where, Fij is the volume of trade between two countries, G is gravitational constant, MiMj is economic masses of countries, Dij is the distance between countries i and j.
Three most major trade partners of Denmark are: Germany, Sweden and the United …show more content…

The government has two sets of instruments with the help of which it has influence the total demand: monetary and fiscal policy. Fiscal policy is a budgeting policy. It is aimed to regulation and prevention of undesirable changes in aggregate expenditures by planning changes in investments and taxes. Monetary policy is a policy that prevents undesirable fluctuations in aggregate demand through the planned changes in the reserves of commercial banks or their reserve standards.
The Denmark National Bank is the responsible structure for monetary policy of Denmark government. It is the central bank of Denmark since 1936 year. According to the law, the bank should support maintaining the currency system in safety and improve the system of monetary circulation and credit provision. The national currency of Denmark is krone. However, Denmark is the member of EU it keeps its traditional currency but krone is mostly depends on euro. So, the major purpose of the national bank of Denmark is to keep stable krone against euro. When the national bank of Denmark changes its interest rate relative to the interest rate of European National bank, it affects its exchange rate of krone against the …show more content…

The National Bank of Denmark is responsible for monetary policy, while the Danish government and the Parliament are responsible for fiscal policy and economic policy in general.
The fixed-exchange-rate policy means that Denmark's monetary policy is aimed at keeping the krone stable against the euro The Danish government forms its fiscal policy and economic policy in general so as to achieve a stable economic development. Stability-orientated fiscal policy is also of vital importance to the fixed-exchange-rate policy. If Denmark’s National bank changes its interest rates, it affects the exchange rate of the

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