Regression Analysis of Foreign Trade in the CR in 1993-1998

This paper presents regression analyses of import and export functions in the Czech Republic from 1993 to 1998. The first part of the article summarizes the standard Keynesian income approach to the balance of payments. This traditional theory is considered alongside the theory of the monetary approach. The author creates his own regression import and export function models, in which he uses, besides traditional variables (GDP, exchange rate, domestic and foreign inflation, import and export prices), such variables as real money supply, foreign direct investment, unemployment data and number of working days. The results imply that domestic demand growth, represented by the combined effects of GDP and money supply growth, is the most important factor in explaining import dynamics.