Determining Factors of the Czech Foreign Trade Balance:Structural Issues in Trade Creation

Using panel data for 29 industries, the study tests alternative specifications of Czech export and import functions. The balance of trade is primarily influenced by the real exchange rate, aggregate demand and tariff changes. Reduced growth of the Czech economy after 1996 was an important factor that has kept the balance of trade at a sustainable level in the medium-term, contributing even to the appreciation of the real exchange rate