Český finanční a účetní časopis 2021(2):5-26 | DOI: 10.18267/j.cfuc.560

Analysis of the export and import function of the Czech Republic: aggregate and structural view

Filip Pastucha

Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, katedra měnové teorie a politiky, nám. W. Churchilla 4, 130 67 Praha 3

The article deals with modelling of the import and export function of the Czech Republic with an emphasis on the structural view of foreign trade. As the Czech economy is a very open one, a detailed quantification of the variables affecting foreign trade may be crucial for the future direction of economic policy. The models are constructed using a cointegration or an error correction model distinguishing between short-run and long-run relationships. In addition, VAR models of disaggregated import and export functions are constructed using SITC groups examining whether there is a significant difference in the explanatory variables relative to the overall model. In the import function, the statistical significance of domestic demand characterized by absorption is confirmed in line with theory. Imports do not respond to the real exchange rate in the short run, but in the long run they already respond in line with theory. The import intensity of exports (the explanatory variable exports) came out significant. This confirms the import intensity, which the Czech economy has been struggling with for a long time. In the case of the export function, the important explanatory variable is external demand expressed in terms of EU GDP. The real exchange rate has an effect consistent with theory in the short run, but in the long run the estimated sign in front of the explanatory variable is inconsistent with theory. Domestic demand in the form of private and government consumption affects exports negatively. The disaggregated models did not show significant differences from the overall model for both imports and exports.

Keywords: Export function; Import function; Cointegration; Error correction model; VAR model

JEL classification: C5, F14

Received: July 28, 2021; Revised: September 17, 2021; Accepted: September 20, 2021; Prepublished online: October 18, 2021; Published: October 20, 2021  Show citation