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Intraperiod and Intertemporal Substitution in Import Demand

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Author Info
Robert A. Amano () (Bank of Canada and Center for Research on Economic Fluctuations and Employment)
Wai-Ming Ho (University of Waterloo)
Tony S. Wirjanto (University of Waterloo)

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Abstract

In this paper, we study intraperiod and intertemporal substitution in U.S. import demand using a two-good version of the permanent-income model that allows for nonseparability between domestic and imported goods consumption. The intratemporal elasticity of substitution between the two goods is estimated to be about 1.09 while the intertemporal elasticity of substitution of the composite good is estimated to be statistically larger than the intraperiod measure and lie between 1.36 to 1.39. We then explore the implications of these estimates for intraperiod and intertemporal substitution in the presence of an exogenous real exchange rate movement.

Dans ce papier, nous étudions la substitution intrapériode et intertemporelle de la demande d'importations des États-Unis en utilisant une version à deux biens du modèle du revenu permanent qui permet de tenir compte de la non-séparabilité entre les biens de consommation domestiques et importés. L'élasticité intratemporelle est estimée à environ 1.09 tandis que l'élasticité de substitution intertemporelle du bien composé est statistiquement plus élevée que la mesure intrapériode et se trouve entre 1.36 et 1.39. Par la suite, nous explorons les implications de ces estimations pour la substitution intrapériode et intertemporelle dans la présence d'un mouvement exogène du taux de change réel.

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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 84.

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Length: 22 pages
Date of creation: Aug 1999
Date of revision:
Handle: RePEc:cre:crefwp:84

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Related research
Keywords: permanent income nonseparable preferences cointegration consumption

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
F10 - International Economics - - Trade - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  2. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
    Other versions:
  3. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January. [Downloadable!] (restricted)
  4. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March. [Downloadable!] (restricted)
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    Other versions:
  6. Marquez, Jaime, 1990. "Bilateral Trade Elasticities," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 70-77, February. [Downloadable!] (restricted)
  7. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
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    Other versions:
  9. Ng, S. & Perron, P., 1994. "Unit Root Tests ARMA Models with Data Dependent Methods for the Selection of the Truncation Lag," Cahiers de recherche 9423, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    Other versions:
  10. han, H.L. & Ogaki, M., 1991. "Consumption, Income, and Cointegration Further Analysis," RCER Working Papers 305, University of Rochester - Center for Economic Research (RCER).
  11. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  12. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
    Other versions:
  13. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers 209, University of Rochester - Center for Economic Research (RCER).
    Other versions:
  14. Ceglowski, Janet, 1991. "Intertemporal substitution in import demand," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 118-130, March. [Downloadable!] (restricted)
  15. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July. [Downloadable!] (restricted)
    Other versions:
  16. repec:cup:etheor:v:10:y:1994:i:1:p:95-115 is not listed on IDEAS
  17. Cooley, Thomas F & Ogaki, Masao, 1996. "A Time Series Analysis of Real Wages, Consumption, and Asset Returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 119-34, March-Apr. [Downloadable!] (restricted)
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  22. Amano, Robert A. & Wirjanto, Tony S., 1996. "Intertemporal substitution, imports and the permanent income model," Journal of International Economics, Elsevier, vol. 40(3-4), pages 439-457, May. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Roberto Duncan, 2003. "The Harberger-Laursen-Metzler Effect Revisited: An Indirect-Utility-Function Approach," Working Papers Central Bank of Chile 250, Central Bank of Chile. [Downloadable!]
  2. Tony S. Wirjanto, 2004. "Exploring consumption-based asset pricing model with stochastic-trend forcing processes," Applied Economics, Taylor and Francis Journals, vol. 36(14), pages 1591-1597, August. [Downloadable!] (restricted)
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