Linkage among exchange rate, price level and balance of payments: The case of the Czech Republic
| Authors | |
|---|---|
| Year of publication | 2016 |
| Type | Article in Proceedings |
| Conference | The 8th international conference: Economic Challenges in Enlarged Europe |
| MU Faculty or unit | |
| Citation | |
| Field | Economy |
| Keywords | exchange rate; balance of payments; cointegration; VECM; Granger causality |
| Description | Relationships between selected macroeconomic variables - nominal exchange rate, international reserves, real exchange rate, price level, credit and debit transactions of balance of payments - in the Czech Republic have been investigated in presented paper. Implemented cointegration analysis and vector error correction model suggest several pairs of Granger causalities. It has been discovered that change in price level Granger-causes international reserves change and change in debit transactions Granger-causes price level change. These relationships have nature of two-way Granger causalities, which means that reversed relationships hold as well. One-way Granger causality was found also in two cases: change in nominal exchange rate Granger-causes real exchange rate change and change in credit transactions Granger-causes price level change. Other relationships implying Granger causality were inconclusive. Error term was significant only in cases of variables price level and debit transactions, which means that only these variables return to their long-term equilibria. |
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