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Estimating Gravity Model in the Czech Republic: Empirical Study of Impact of IFRS on Czech International Trade

Author

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  • Erginbay Ugurlu
  • Irena Jindrichovska

Abstract

Purpose: In this paper, we test the influence on foreign trade and FDI by using the gravity model within the EU. The influence of IFRS is also tested, although we might expect that its influence will be smaller than that of other factors. Design/Methodology/Approach: According to the gravity model, countries are trading according to their proximity and also according to the size of their GDP. Negative influence is played by trade barriers and positive by common traditions and a common political background. Big countries trade a lot between each other, e.g., the USA and Canada on the same continent or the USA and Germany in different continents. Smaller countries, like the Czech Republic, do not have such an impact on the scale of world trade. The size of exports /imports is influenced by the fact of whether or not they are part of some trading bloc, e.g., the EU in Europe or NAFTA in America. Accounting rules, namely IFRS, are expected to be perceived as a positive influence on the world trade of a particular country and a country´s FDI (Foreign Direct Investment). Findings: Contrary to our expectations, we have found that the influence of IFRS is not insignificant and is more pronounced after the year 2010 which coincides with the change of local regulations. Practical Implications: The findings establish an interesting signal relating to perceiving the increasing quality of the Czech economic environment including accounting regulations. Originality/Value: Based on our methodology accounting rules, namely IFRS, are expected to be perceived as a positive influence on the world trade of a particular country and a country´s FDI (Foreign Direct Investment).

Suggested Citation

  • Erginbay Ugurlu & Irena Jindrichovska, 2019. "Estimating Gravity Model in the Czech Republic: Empirical Study of Impact of IFRS on Czech International Trade," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 265-281.
    • Handle: RePEc:ers:journl:v:xxii:y:2019:i:2:p:265-281
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    References listed on IDEAS

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    Cited by:

    1. Irena Jindřichovská & Erginbay Uğurlu, 2021. "E.U. and China Trends in Trade in Challenging Times," JRFM, MDPI, vol. 14(2), pages 1-19, February.
    2. Irena Jindrichovska & Erginbay Ugurlu & Eleftherios I. Thalassinos, 2020. "Exploring the Trend of Czech FDIs and their Effect to Institutional Environment," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 94-108.

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    More about this item

    Keywords

    Gravity model; export; EU; international trade; IFRS.;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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