Cointegration Analysis of Foreign Trade in the Czech Republic, 1993-98

Abstract

This paper presents cointegration analyses of the import and export functions of the Czech Republic in 1993-1998 by identifying the main variable factors and estimating the long-run equilibrium relationship of Czech foreign trade functions. A long-run equilibrium relationship was found in the Czech import function. On the other hand, this relationship was weak in the Czech export function (coefficient of determination was only about 60%). This paper also corroborates evidence of the long-run impact of the money market imbalance to the real economy. Therefore, the author concludes, the Keynesian theory of the adjustment process applied to the balance of payments in the long-run should be complemented by the monetary approach.In the appendix to the paper, the author estimates a relationship between Czech export and import to calculate Czech export's import intensity.elasticity of import; elasticity of export; trade balance; cointegration analysis