Czech exports and german GDP: A closer look

Abstract

This paper analyses the relation between Czech exports in goods and services and German GDP. In order to contribute to the current state of knowledge the analysis goes more into detail in terms of disaggregating the German GDP. Do Czech exports depend more on German domestic absorption, or is it, rather, German exports which determine Czech exports? Does the Czech Republic produce goods for German consumers or is it an “outsourced” supplier to German export channels, instead? Co-integration analysis and the analysis of the commodity structure of Czech exports to Germany are employed to address these questions. The findings of this research indicate that the relationship between Czech exports and German GDP is a very complex one. The Czech economy can be considered a part of German distribution channels, which serves as its specialized outsourced production capacity.