Cointegration analysis of foreign trade in the Czech Republic, 1993-98

This paper presents cointegration analyses of the import and export functio ns of the Czech Republic in 1993-1998 by identifying the main variable fact ors and estimating the long-run equilibrium relationship of Czech foreign t rade 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 p aper also corroborates evidence of the long-run impact of the money market imbalance to the real economy. Therefore, the author concludes, the Keynesi an theory of the adjustment process applied to the balance of payments in t he long-run should be complemented by the monetary approach. In the appendix to the paper, the author estimates a relationship between C zech export and import to calculate Czech export's import intensity.