Work detail

Analysis of Czech Trade Structure Using the Zipf’s Law

Author: Bc. Rufat Asadli
Year: 2022 - summer
Leaders: RNDr. Michal Červinka Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 53
Awards and prizes:
Link: https://dspace.cuni.cz/handle/20.500.11956/173662
Abstract: The Revealed Comparative Advantage (RCA) has been a cornerstone for
cross-country trade analyses. Corresponding indices that quantify this phenomenon have long been subject to studies testing how far they are distributed from normal distribution. This thesis analyzes RCA indices alongside the Zipf’s Law, which asserts that data points are linearly distributed
with a negative relationship to their ranks. Trade data, covering 1998-2020,
from the Czech Republic are initially utilized in a particular model. In this
case, it is documented that RCA indices largely follow the Zipf’s Law in
log-log scale. Regression coefficients from this model, specifying exponent
parameters of the distribution, are employed alongside a set of economic
indicators in an advanced time series model, namely Vector Autoregression
(VAR), to derive the economic inference of so-called power law exponents.
The model reveals certain economic interpretations, including the fact that
economic shocks might reduce comparative advantage of a country over a
commodity
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