Exchange Rate Volatility and Trade: Trade in Intermediates versus Trade in Final Products
|Název práce v češtině:||Volatilita měnového kurzu a obchod: obchod s meziprodukty versus obchod finálními produkty|
|Název v anglickém jazyce:||Exchange Rate Volatility and Trade: Trade in Intermediates versus Trade in Final Products|
|Akademický rok vypsání:||2017/2018|
|Typ práce:||bakalářská práce|
|Ústav:||Institut ekonomických studií (23-IES)|
|Vedoucí / školitel:||Ing. Vilém Semerák, M.A., Ph.D.|
|Řešitel:||skrytý - zadáno vedoucím/školitelem|
|Datum a čas obhajoby:||10.09.2019 09:00|
|Datum odevzdání elektronické podoby:||31.07.2019|
|Datum proběhlé obhajoby:||10.09.2019|
|Oponenti:||Mgr. Alina Cazachevici|
|Seznam odborné literatury|
Anderson, J. E. and van Wincoop, E. (2003), “Gravity with gravitas: a solution to the border puzzle”,
American Economic Review.
Baier, S. L. and Bergstrand, J. H. (2009), “Bonus vetus OLS: a simple method for approximating
international trade-cost effects using the gravity equation”, Journal of International Economics.
Bergstrand, J. H. (1985), “The gravity equation in international trade: some microeconomic
foundations and empirical evidence”, The Review of Economics and Statistics.
Santos Silva, J. and Tenreyro, S. (2006), “The log of gravity”, The Review of Economics and Statistics.
Tinbergen, J. (1962), Shaping the World Economy, Twentieth Century Fund.
Timmer, M. P., Dietzenbacher, E., Los, B., Stehrer, R. and Vries, G. J. (2015), User Guide to World Input–Output Database. Review of International Economics.
Rose, Andrew. (2000). One money, one market: Estimating the effect of common currencies on trade. Economic Policy.
Baldwin, R. and Taglioni, D. (2006), “Gravity for dummies and dummies for gravity equations”, National Bureau of Economic Research Working Paper.
Havránek, Tomáš. (2010). Rose Effect and the Euro: The Magic is Gone. Review of World Economics.
A practical guide to trade policy analysis. (2012). Geneva: World Trade Organization.
|Předběžná náplň práce|
|Research question and motivation
Interconnectedness of global production chains is widely recognised global phenomenon. My thesis will focus on international trade flows between suppliers and manufacturers influenced by volatile exchange rate, this narrows the area of research, which will allow me to observe specific effects and differs it from other studies, that have been completed on topic of exchange rate volatility influencing international trade.
The aim is to run the regression and test hypothesis about impact of exchange rate volatility on trade using gravity model of exports.
The fundamental questions, I am going to discus in my thesis, are: “What is the estimated effect of fluctuating exchange rate on trade relations between suppliers and manufacturers?”, “How well gravity model works in this case?”.
As primary data for my thesis I will use WIOT (= World input output table, matrices of mutual inputs traded globally) This type of data is very recent (released in 2016, available at http://www.wiod.org/release16). Though, its variability is limited, there are trade flows among 43 countries (28 of which are EU countries and the remaining 15 are major world economies) featured from 2000 to 2014. This might cause problems, that I will address later in my work, since this sample is distributed quite unevenly. For instance, minor economy such as Estonia shall be analysed with major economies of the world (China, Australia, etc.), but lesser economies outside the Europe are missing here.
Contemporary literature is considerably sceptical about impacts of monetary unions (i.e. exchange rate indirectly) – (see survey paper Havránek, Rose Effect and the Euro: The Magic is Gone below), but in theory, we might expect that existing production chains might be less elastic with respect to exchange rate due to costs associated with switching to another supplier. That is why WIOT data are convenient for my analysis since there are featured both trade relations between supplier and manufacturer and demand for final product. I am going to aggregate both export and demand in order, to match them with my model results. Furthermore, there are significant attempts in field of gravity model analysis worth referring in my thesis, these are studies by Anderson & Van Wincoop and Baldwin & Taglioni listed below.
International trade analyses have broad implications for policy makers and participants of trade relations. Besides the goal I explained above, my work should promote gravity model as one of estimates of trade potentials.
As said before, I will employ gravity model as a tool for analysing my data. Gravity model is very popular model used for estimation of trends in international trade. Alike gravity equation from classical Newtonian physics, which describes gravity force as a product of two objects’ masses divided by the square of their distance multiplied by given gravitational constant, gravity model tries to approximate trade flows between two economies in the same manner, larger the economy the greater is its “mass” and greater the force it is attracted to another weighty economy and “force weakens” further they are.
“One money, one market: Estimating the effect of common currencies on trade” by A. Rose is a very influential study published on this topic that focuses on impact of being a member of monetary union, rather than exchange rate volatility. However, I am going to use gravity models which respect latest requirements (based on micro foundations, models which account for the non-linearity of the MTR).
I will use Rstudio software to compute the model using gravity model package (available at: https://www.rdocumentation.org/packages/gravity/versions/0.6)
2) Literature review