Modeling and Optimal Control of Product Space Network during Covid-19 Pandemic with the Effect of Variation in USDX

Herick Laiton Kayange^1,

¹College of Mathematics and Computer Science, Zhejiang Normal University, 688 Yingbin Ave, Jinhua 321004, China

Cite this paper:
Herick Laiton Kayange. Modeling and Optimal Control of Product Space Network during Covid-19 Pandemic with the Effect of Variation in USDX. American Journal of Modeling and Optimization. 2022; 9(1):6-14. doi: 10.12691/ajmo-9-1-2

Abstract

The exportation of products is very important for developing World Economies. Countries produce and export products not far from their production structure since they will require the same requisite capabilities. Proximity is the possibility of exporting one product, given that the Economy is exporting another. The higher the Proximity means, the higher the likelihood of two products being exported in tandem. The United States dollar is still the dominant currency in international trade transactions. Since most transactions are invoiced in the U.S dollar, the United States dollar index has been used to trace the value of the U.S dollar against other global currencies. Therefore optimization of controls on proximities and variation in USDX is essential in maximizing export rates. The outbreak of COVID-19 in December 2019 resulted in the decline of International trade activities and exportation in particular. This study used the Lotka Volterra model to examine the effect of COVID-19 on International trade; it was found that the significant impact of COVID-19 was in 2020. Lastly, Pontryagin's Maximum principle was used to optimize Proximity and USDX control to see the maximum possible achievement of exports each year. It was found that optimizing USDX control is more efficient in increasing export rate than optimizing Proximity control. However, optimization of both control is most effective for product exports in the International Trade Network.

Keywords:
international trade network Lotka-Volterra proximity United States dollar index (USDX) optimal control

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