IDEAS home Printed from https://ideas.repec.org/a/rfe/zbefri/v37y2019i2p853-872.html
   My bibliography  Save this article

Time-varying parameters of Croatian import demand

Author

Listed:
  • Mile Bošnjak

    (University of Zagreb, Faculty of Economics and Business, JF Kennedy Square 6, 10000 Zagreb, Croatia.)

  • Vlatka Bilas

    (University of Zagreb, Faculty of Economics and Business, JF Kennedy Square 6, 10000 Zagreb, Croatia.)

  • Domagoj Raèiæ

    (J.J. Strossmayer University of Osijek, Faculty of Economics in Osijek, LJ. Gaj sq. 7, 31000 Osijek, Croatia.)

Abstract

The paper aims to examine Croatian import demand elasticities to changes in income and relative prices while allowing time variation in parameters of import demand. Data sample consist of quarterly time series data over the period 2000 q1 -2018 q3. Following state space model with time-varying parameters approach estimates were obtained and tested. The results revealed persistent and high income elasticity of import demand in Croatia. However, the role of relative prices has changed over the observed period and eventually cannot be distinguished from zero. The findings from this research supported the hypothesis of prices convergence in Croatia towards the prices within European Monetary Union member countries. Furthermore, results found no significant effect on Croatian import demand when Croatia joined the European Union. The research results indicate that, due to a relatively high income elasticity of import demand and convergence of import prices, production of innovative and sophisticated products should be facilitated.

Suggested Citation

  • Mile Bošnjak & Vlatka Bilas & Domagoj Raèiæ, 2019. "Time-varying parameters of Croatian import demand," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 853-872.
    • Handle: RePEc:rfe:zbefri:v:37:y:2019:i:2:p:853-872
    as

    Download full text from publisher

    File URL: https://www.efri.uniri.hr/upload/ZBORNIK%202_2019/18-Bosnjak-Bilas-Racic-2019-2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nina Ranilović, 2017. "The Effects of Economic Integration on Croatian Merchandise Trade: A Gravity Model Study," Working Papers 50, The Croatian National Bank, Croatia.
    2. Kurtovic, Safet & Halili, Blerim & Maxhuni, Nehat, 2016. "Bilateral Trade Elasticity: B&H versus its seven trade partners," MPRA Paper 72297, University Library of Munich, Germany.
    3. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    4. Juan Carlos Cuestas & Luis A. Gil-Alana & Karl Taylor, 2016. "Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non-linearities and long memory," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(5), pages 519-538, November.
    5. Harvey,Andrew C., 1991. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521405737.
    6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    7. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    8. Marc Auboin & Floriana Borino, 2018. "The Falling Elasticity of Global Trade to Economic Activity: Testing the Demand Channel," CESifo Working Paper Series 7228, CESifo.
    9. Julia Grübler & Mahdi Ghodsi & Robert Stehrer, 2022. "Import demand elasticities revisited," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 31(1), pages 46-74, January.
    10. Andrea Cerasa & Daniela Buscaglia, 2017. "Do the EU countries import at the same price? The case of coffee," Agricultural Economics, International Association of Agricultural Economists, vol. 48(3), pages 397-408, May.
    11. Olcay Yucel Culha & Okan Eren & Ferya Ogunc, 2019. "Import demand function for Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 19(1), pages 9-19.
    12. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    13. Yu Hsing, 2016. "Impacts of Government Debt, the Exchange Rate and Other Macroeconomic Variables on Aggregate Output in Croatia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(3 (Fall)), pages 223-231.
    14. Crucini, Mario J. & Davis, J. Scott, 2016. "Distribution capital and the short- and long-run import demand elasticity," Journal of International Economics, Elsevier, vol. 100(C), pages 203-219.
    15. Nina Ranilović, 2017. "The Effects of Economic Integration on Croatian Merchandise Trade: A Gravity Model Study," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 382-404, September.
    16. Bošnjak Mile, 2019. "Determinants of Current Account in Cases of Serbia and Romania: Time-Varying Parameters Approach," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 21-33, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nidhaleddine Ben Cheikh & Christophe Rault, 2016. "Recent estimates of exchange rate pass-through to import prices in the euro area," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 69-105, February.
    2. Le Pen, Yannick, 2011. "A pair-wise approach to output convergence between European regions," Economic Modelling, Elsevier, vol. 28(3), pages 955-964, May.
    3. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2017. "Oil price shocks and policy uncertainty: New evidence on the effects of US and non-US oil production," Energy Economics, Elsevier, vol. 66(C), pages 536-546.
    4. Chevallier, Julien, 2011. "Evaluating the carbon-macroeconomy relationship: Evidence from threshold vector error-correction and Markov-switching VAR models," Economic Modelling, Elsevier, vol. 28(6), pages 2634-2656.
    5. Sarno, Lucio & Thornton, Daniel L. & Valente, Giorgio, 2007. "The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yields," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(1), pages 81-100, March.
    6. Raihan, Selim & Abdullah, S M & Barkat, Aroni & Siddiqua, Salina, 2017. "Mean Reversion of the Real Exchange Rate and the validity of PPP Hypothesis in the context of Bangladesh: A Holistic Approach," MPRA Paper 77172, University Library of Munich, Germany.
    7. Victor Bystrov, 2014. "A factor-augmented model of markup on mortgage loans in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 45(6), pages 491-512.
    8. Philipp Lieberknecht & Philip Vermeulen, 2022. "Wealth and income inequality in the long run," CAMA Working Papers 2022-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    10. Emmanuel Apergis & Nicholas Apergis, 2019. "“Sakura” has not grown in a day: infrastructure investment and economic growth in Japan under different tax regimes," Empirical Economics, Springer, vol. 57(2), pages 541-567, August.
    11. Andisheh Saliminezhad & Huseyin Ozdeser & Dahiru Alhaji Bala Birnintsaba, 2022. "Environmental degradation and economic growth: time-varying and nonlinear evidence from Nigeria," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(5), pages 6288-6301, May.
    12. Monika Blaszkiewicz-Schwartzman, 2007. "Explaining Exchange Rate Movements in New Member States of the European Union: Nominal and Real Convergence," Money Macro and Finance (MMF) Research Group Conference 2006 144, Money Macro and Finance Research Group.
    13. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2014. "Causality and contagion in EMU sovereign debt markets," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 12-27.
    14. Delgado Narro, Augusto Ricardo, 2020. "The Process of Convergence among the Japanese Prefectures: 1955 - 2012," MPRA Paper 100361, University Library of Munich, Germany.
    15. Yingying Xu & Zhi‐Xin Liu & Chi‐Wei Su & Jaime Ortiz, 2019. "Gold and inflation: Expected inflation effect or carrying cost effect?," International Finance, Wiley Blackwell, vol. 22(3), pages 380-398, December.
    16. Tarlok Singh, 2016. "On the sectoral linkages and pattern of economic growth in India," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 21(2), pages 257-275, April.
    17. Boschi, Melisso & Girardi, Alessandro, 2011. "The contribution of domestic, regional and international factors to Latin America's business cycle," Economic Modelling, Elsevier, vol. 28(3), pages 1235-1246, May.
    18. Singh, Tarlok, 2014. "On the regime-switching and asymmetric dynamics of economic growth in the OECD countries," Research in Economics, Elsevier, vol. 68(2), pages 169-192.
    19. Kuo, Biing-Shen, 1998. "Test for partial parameter instability in regressions with I(1) processes," Journal of Econometrics, Elsevier, vol. 86(2), pages 337-368, June.
    20. Zaklan, Aleksandar & Abrell, Jan & Neumann, Anne, 2016. "Stationarity changes in long-run energy commodity prices," Energy Economics, Elsevier, vol. 59(C), pages 96-103.

    More about this item

    Keywords

    import demand; income; relative prices; Kalman filter; Croatia;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rfe:zbefri:v:37:y:2019:i:2:p:853-872. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Danijela Ujcic (email available below). General contact details of provider: https://edirc.repec.org/data/efrijhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.