Risk in international trade

• Název v anglickém jazyce: Risk in international trade
• Klíčová slova anglicky: international trade, risk, risk management, gravity model
• Akademický rok vypsání: 2015/2016
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: Mgr. Michal Paulus
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 09.06.2016
• Datum zadání: 09.06.2016

Předběžná náplň práce v anglickém jazyce

Research question and motivation
What are the risks business entities face when undertaking international trade? How do these influence the volume of trade between countries and are there ways to mitigate them?
The focus of this thesis will be mainly on commercial risks (i.e. risks of default of the commercial partner on his obligations, which includes the inability or unwillingness to pay or perform, cancellation of the contract, and unfounded refusal to accept the object of the contract) and country risks (i.e. risks due to unstable political and macroeconomic situation, e.g. vis major, i.e. irresistible, overpowering agent or force, such as a hurricane, which causes damage or disruption, or change of statutes, etc.). The former will be discussed in a form of theoretical distinction between different kinds of commercial risks and the latter will be addressed in the same way with addition of a gravity model, where country risk will be the key variable in the model.
This topic is very relevant in today’s fast-moving and internationally intertwined economy. With trade relations becoming globalized and lack of regulation at this level, traders face an enormous number and amount of risks. This paper aims to map these risks and also give an overview of ways to mitigate them. This topic is current and very interesting, with new institutions to mitigate risks developing over time.

Contribution
The intended contribution is mainly empirical. The thesis will provide categorization of risks with a focus on commercial and country risks and proposals for their mitigation, based on real-life instruments that deal with said risks. The thesis will also include a gravity model of trade, showing the impact of risks on international trade.
Since there’s not much literature that would combine the qualitative and quantitative analysis of the problem, the results could have a practical use for smaller-scaled traders involved in international trade, that are not aware of the risks they’re facing.

Methodology
Qualitatively the paper will analyse commercial and country risks and ways to mitigate them. Then, quantitatively, it will analyse WTO and Comtrade data to see how country risk influences trade with a given country. This will be done by constructing a gravity model of trade, more precisely micro-founded gravity model (Anderson & Wincoop, 2003; Eaton & Kortum, 2002).
This paper will also try to approximate multilateral trade resistance terms through use of dummies (Baldwin & Taglioni, 2007) (through the Poisson pseudo-maximum-likelihood estimator (Santos Silva & Tenreyro, 2006)) and thw Taylor polynomial (Baier & Bergstrand, 2009).

Outline
1. Introduction
2. Overview of most important risks in international trade
3. Ways to mitigate them
4. Relationship between country risk and international trade with that country
5. Conclusion