F14 - Empirical Studies of TradeReturn

This paper focuses on import and export of goods of the Czech Republic. The Czech Republic is very open country in European Union. Ratio of import and export of goods and services to GDP is above European Union average. The goal is to find explanatory variables, which have an influence on import and export of goods and to build robust and economically interpretable models. Models are created by cointegration analysis. The advantage of cointegration analysis and error correction models is avoiding spurious regression and differentiation of short-term and long-term relations. There will be used ARDL approach for building models.

This paper empirically investigates the impact of change in exchange rate on export and import flows between Slovakia and its major trading partners. Devaluation or depreciation of a currency worsens the trade balance before improving it, resulting in a J-curve pattern. For the purpose of this paper, aggregated and disaggregated approaches are used. This paper investigates J-curve phenomenon using quarterly time series data over the period 1997:1 to 2013:4. The results provide evidence that the classical J-curve effect does not exist in Slovakia on the aggregated level. Instead, currency depreciation (increase in real effective exchange rate) is accompanied only by positive change in trade balance with no deterioration under initial value. On the bilateral level, there exists J- curve in trade with Hungary.