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This paper presents cointegration analyses of the import and export functions of the Czech Republic in 1993-1998 by identifying the main variable factors and estimating the long-run equilibrium relationship of Czech foreign trade functions. A long-run equilibrium relationship was found in the Czech import function. On the other hand, this relationship was weak in the Czech export function (coefficient of determination was only about 60%). This paper also corroborates evidence of the long-run impact of the money market imbalance to the real economy. Therefore, the author concludes, the Keynesian theory of the adjustment process applied to the balance of payments in the long-run should be complemented by the monetary approach.In the appendix to the paper, the author estimates a relationship between Czech export and import to calculate Czech export's import intensity.

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.

The author's 1982 article on the fallacy of composition questioned the feasibility of generalizing the "G4" (Hong Kong (China), the Republic of Korea, Singapore, and Taiwan (China)) growth model based on rapid growth of exports, on grounds that if all developing economies pursued it, their combined manufactured exports would eventually trigger protection in industrial countries. The1984 book of author identified a safe speed limit of about 10-15 percent annually for growth of developing country exports of manufactures, well below the 25-35 percent rate of Korea and Taiwan, China in the 1960s and 1970s. This study revisits this question in the light of a quarter-century of experience. It finds that developing countries' aggregate manufactured exports grew at about 10 percent annually, a robust pace but within the speed limits he had envisioned. Even so, in key sectors such as apparel, import penetration levels have exceeded thresholds that his earlier estimates would have suggested would provoke protection, suggesting the importance of increased World Trade Organization (WTO) discipline. The base of manufactured exports from poor countries remains small relative to that of China and the original G4, so there should be considerable room for export growth from these newcomers. However, a new macroeconomic version of the fallacy of composition problem could arise: the growing tendency of China and some other major emerging market economies to pursue rapidly rising trade surpluses that have their counterpart in an increasingly unsustainable U.S. current account deficit.

This article assesses the impact of the world price-depressing effect of agricultural subsidies and border protection in Organization for Economic Co-operation and Development (OECD) countries on developing economies' exports, imports, and welfare. Developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers, whereas net importers may lose as world prices rise. A simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities. Simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies' exports and welfare than a 50 percent reduction in agricultural subsidies. Although there is significant heterogeneity across developing economies, the results suggest that efforts in the Doha round of World Trade Organization (WTO) negotiations should be directed at substantially reducing border protection.