The Connection between the Exchange Rate and the Balance of Payments Accounts in the Czech Republic: An Econometric Approach

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F17%3A00095901" target="_blank" >RIV/00216224:14560/17:00095901 - isvavai.cz</a>
Result on the web
<a href="http://dx.doi.org/10.5817/FAI2017-1-4" target="_blank" >http://dx.doi.org/10.5817/FAI2017-1-4</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.5817/FAI2017-1-4" target="_blank" >10.5817/FAI2017-1-4</a>

Result language
angličtina
Original language name
The Connection between the Exchange Rate and the Balance of Payments Accounts in the Czech Republic: An Econometric Approach
Original language description
Relationships between the nominal exchange rate, the current account and the financial account of the balance of payments in the Czech Republic are investigated in this presented paper. The implemented cointegration analysis and vector error correction model suggest one pair of Granger causality. It has been discovered that change in the current account balance Granger-causes a change in financial account balance. This relationship has the nature of two-way Granger causality, which means that a reversed relationship holds as well. Other relationships implying Granger causality were not found. Error terms were significant only in regressions with both accounts as dependent variables, which imply that only these variables return to their long-term equilibria. Because an increase in financial account surplus leads to a decrease in current account surplus (or deepening the current account deficit), excessive liberalization of the Czech financial system can lead to a large capital inflow, jeopardizes current account sustainability and results in a currency crisis in the Czech economy.
Czech name
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Czech description
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Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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