Alumni Changing the World

Karel Janda: “Bank Credit with Government Support”

Room 4, 2nd floor

Abstract:

The topic of the paper is quite a novel one—it is one of a few empirical academic papers dealing with export credit available in economic literature. Moreover, it is the first analysis of this kind which focuses on transition economies. The paper deals with export credit promotion in the Czech Republic. The development and structure of Czech trade and export support is presented first, followed by an econometric analysis of the gravity model of Czech trade. A panel of 160 countries in 1996–2008 is analyzed and two gravity models of exports in the Czech Republic are estimated, the static model by fixed effects (LSDV estimator) and the dynamic model by System-GMM. Due to ambiguous conclusions we assume that the pattern of behavior of our explanatory variables is not uniform and our data set behaves as a mixture of countries with heterogeneous behavior. This means that traditional techniques of estimation which include all observations into one model do not give significant results. Thus, we use robust techniques of estimation that solve the problem of heterogeneous patterns in data sets. Out of several possibilities we use the Least Trimmed Squares estimator (LTS) with a leverage point. We show that guarantees is a significant factor that influences positively the volume of exports in the Czech Republic. Moreover, there exist more variables that a ect the size of exports in the Czech Republic. Market forces described by GDP, distance, political risk or gross capital formation are significant in our econometric model. We find that higher GDP, short distance or lower political risk have positive impact on Czech exports.