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Import demand in heterogeneous panel setting

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  • Nasri Harb

Abstract

To study the elasticities of import demand function, a heterogeneous panel is built with data of 40 countries and using panel unit root tests (Im et al., 1997) and panel cointegration tests (Pedroni, 2004). The model is tested with two previously used activity variables: GDP and GDP minus Export for a performance comparison. To estimate elasticities, use is made of two modified panel versions of FMOLS and DOLS developed by Pedroni (1996, 2000, 2001). The tests prove that GDP outperforms GDP minus Exports as an activity variable in the cointegration context. FMOLS and DOLS give close results when individual estimates are done. When between-dimension estimators are used, conflicting results are obtained. Then, the sample is split into developed and developing countries and it is shown that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous literature results.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 20 ()
Pages: 2407-2415

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Handle: RePEc:taf:applec:v:37:y:2005:i:20:p:2407-2415

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References

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  1. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  2. Peter C.B. Phillips & Mico Loretan, 1989. "Estimating Long Run Economic Equilibria," Cowles Foundation Discussion Papers 928, Cowles Foundation for Research in Economics, Yale University.
  3. Reinhart, Carmen, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," MPRA Paper 6974, University Library of Munich, Germany.
  4. Dilip Dutta & Nasiruddin Ahmed, 2004. "An aggregate import demand function for India: a cointegration analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 607-613.
  5. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
  6. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
  7. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
  8. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
  9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
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Cited by:
  1. Antonis Adam & Margarita Katsimi & Thomas Moutos, 2008. "Inequality and the Import Demand Function," CESifo Working Paper Series 2196, CESifo Group Munich.
  2. Yoichi, Matsubayashi & Shigeyuki, Hamori, 2009. "Empirical Analysis of Import Demand Behavior of Least Developed Countries," MPRA Paper 17266, University Library of Munich, Germany.
  3. Beck, Roland & Kamps, Annette, 2009. "Petrodollars and imports of oil exporting countries," Working Paper Series 1012, European Central Bank.
  4. Thomas Reininger, 2008. "Factors Driving Import Demand in Selected Central, Eastern and Southeastern European Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 100-125.
  5. Nelson Modeste, 2011. "An Empirical Analysis of the Demand for Imports in Three CARICOM Member Countries: An Application of the Bounds Test for Cointegration," The Review of Black Political Economy, Springer, vol. 38(1), pages 53-62, March.

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