Interpretation of Mundell-Fleming (M-F) model is very similar to IS -- LM model. The main difference is that M-F model is based on an assumption of small open economy. This openness is making this model more realistic then IS -- LM model. These assumptions are suitable for Czech economy. In this thesis, model is estimated and interpreted. The most important is an application to Czech economy concerning the period 2002 - 2010. There are ex post and ex ante predictions based on the estimated reduced form of the model. The ex post forecast is used for the purpose of evaluating whether the model is suitable for the prediction. After finding relevant suitability, prediction of endogenous variables is performed in the following four seasons.