ANALYSIS OF FOREIGN TRADE IN SELECTED MANUFACTURING INDUSTRY COMMODITIES

Abstract

Export oriented companies are extremely important for the Czech Republic as a highly open economy. These companies contribute to the generation of GDP and ensure that the current account on its balance of payments remains balanced. International trade is currently enjoying rapid growth because most trading subjects are aware of the importance of developing international activities which aim to sell products on foreign markets. This high sectoral concentration of Czech exporters along with a significant territorial export orientation primarily towards EU states means the Czech Republic is highly vulnerable to fluctuations and economic disturbances on foreign markets. The research investigates application of the gravity model of foreign trade on selected branches of the manufacturing industry and identifies significant factors which affect trade flow. The main aim of the research was to determine statistically significant export variables and generally confirm the suitability of using the gravity model equation as a tool for analysing trade flow and discovering trade potential. Part of the research involved compiling a basic modified export gravity model of foreign trade. This model allows identification of the statistically significant explanatory variables which fundamentally affect the Czech Republic's exports. The paper presents this model and the outputs which relate to selected commodities produced by the manufacturing industry, such as basic metals, coke and oil products, chemical substances and preparations, etc.