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Determinants of Aggregate Import Demand of Bangladesh: Cointegration and Error Correction Modelling

Author

Listed:
  • Nusrate Aziz

    (University of Birmingham)

  • Nicholas Horsewood

Abstract

The study focuses on the empirical modelling of the major determinants of imports demand of Bangladesh using annual data. We, not only, critically examine the determinants of imports demand following conventional wisdom but have taken into account some plausible new determinants like foreign exchange reserves and final expenditure components also. The paper investigates the impact of trade liberalizations as well. We finally employ the equilibrium correction mechanism (ECM) to investigate the short-run dynamics of imports demand. The estimated results demonstrate that the real GDP and relative prices of imports are statistically significant and show expected signs for Bangladesh. Relative imports prices is an important determinant of imports demand both in the short- and long-run. We find that the hypothesis of unit coefficient of income in the aggregate imports demand is apposite in Bangladeshi data. Trade liberalization could not make any special difference for the imports demand of the country. Finally, we argue on the basis of estimated results that the demand for Bangladeshi exports determines its aggregate imports demand. This paper was presented in the 18th International Conference, International Trade and Finance Association, Lisbon, Portugal, May 21-24, 2008.

Suggested Citation

  • Nusrate Aziz & Nicholas Horsewood, 2008. "Determinants of Aggregate Import Demand of Bangladesh: Cointegration and Error Correction Modelling," International Trade and Finance Association Conference Papers 1114, International Trade and Finance Association.
    • Handle: RePEc:bep:itfapp:1114
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    Cited by:

    1. Musyoka, M.P., 2010. "Using Double-Log Imperfect Import Substitutes Model to Estimate Compensated Elasticities and Welfare Impacts," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95774, African Association of Agricultural Economists (AAAE).
    2. Birendra Bahadur Budha, 2014. "The Role of Expenditure Components in Nepal’s Import from India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 37-54, March.
    3. Zunia Saif Tirmazee & Resham Naveed, 2014. "Reviewing Pakistan’s Import Demand Function: A Time-Series Analysis, 1970–2010," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 371-393, September.

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