Work detail

Exchange Rate Volatility Effect on Trade Balance in Czech Republic

Author: Mgr. Anastasiia Naletova
Year: 2020 - summer
Leaders: prof. Ing. Evžen Kočenda M.A., Ph.D., DSc.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 96
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/202863/
Abstract: This master’s thesis investigates the impact of exchange rate volatility on trade balance of the
Czech Republic during 2005-2016. The analysis is performed on the constructed panel dataset for
53 trading partners of the Czech Republic by estimating the trade gravity models. The realized
volatility values are obtained for 43 Czech koruna pairs against the local currencies. The variables
included into the empirical analysis are the GDP and population of the Czech Republic and its
trading partners, realized volatility, weighted distance, contiguity, direct access to the sea and
information on EU and OECD membership. The methodological approaches in the analysis are
calculations of realized exchange rate volatility and for gravity models panel data estimation
techniques: pooled OLS, fixed effects and random effects. The gravity models are compared by
the formal tests, and the most efficient among them is the fixed effects. The results of the estimated
augmented model reveal significant positive impact of exchange rate volatility on trade balance of
the Czech Republic. The key variables that have the expected significant positive impact on trade
balance are GDP of the Czech Republic and its trading partners in the basic model, population of
the Czech Republic and EU membership in the augmented model.

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