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Price and Income Elasticity of Imports: The Case of Pakistan

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  • Khurram Ashfaq Baluch

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  • Syed Kalim Hyder Bukhari

Abstract

The paper estimates the elasticity of Imports with respect to relative prices and income for Pakistan from 1971 to 2009. What distinguishes this paper from the earlier studies is the use of robust estimation technique of Autoregressive Distributed Lag (ARDL) model utilizing the bounds test procedure. The results point to cointegration among the variables. The estimated long run elasticity of Imports with respect to relative prices and income are -0.53 and 1.22 respectively. [SBP WP No. 48]. URL:[http://www.sbp.org.pk/publications/wpapers/2012/wp48.pdf].

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:4899.

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Date of creation: Mar 2012
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Handle: RePEc:ess:wpaper:id:4899

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Keywords: Income Elasticity; exports; Price; Pakistan; Balance of Payments (BoP) account; foreign deficit; GDP; exchange rate; relative prices; imports; demand; Autoregressive Distributed Lag model (ARDL); substitution industries; Ordinary Least Squares (OLS);

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  1. Dipendra Sinha, 1997. "An aggregate import demand function for Pakistan," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 25(1), pages 114-114, March.
  2. Mah, Jai Sheen, 1993. "Structural change in import demand behavior: The Korean experience," Journal of Policy Modeling, Elsevier, Elsevier, vol. 15(2), pages 223-227, April.
  3. Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9811, Faculty of Economics, University of Cambridge.
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  7. Mohsin S. Khan, 1974. "Import and Export Demand in Developing Countries (Demande à l'importation et l'exportation dans les pays en développement) (La demanda de importación y de exportación en los países en des," IMF Staff Papers, Palgrave Macmillan, vol. 21(3), pages 678-693, November.
  8. M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 12(5), pages 471-505, December.
  9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
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  11. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288107, October.
  12. Bardsen, G., 1988. "On The Estimation Of Long Run Coefficients In Error Correction Models," Papers, Norwegian School of Economics and Business Administration- 03-88, Norwegian School of Economics and Business Administration-.
  13. Abdelhak Senhadji, 1998. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 236-268, June.
  14. Dilip Dutta & Nasiruddin Ahmed, 1999. "An aggregate import demand function for Bangladesh: a cointegration approach," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 31(4), pages 465-472.
  15. Tuck Cheong Tang & Mahendhiran Nair, 2002. "A cointegration analysis of Malaysian import demand function: reassessment from the bounds test," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(5), pages 293-296.
  16. Carone, Giuseppe, 1996. "Modeling the U.S. demand for imports through cointegration and error correction," Journal of Policy Modeling, Elsevier, Elsevier, vol. 18(1), pages 1-48, February.
  17. Mwega, Francis M, 1993. "Import Demand Elasticities and Stability during Trade Liberalization: A Case Study of Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 2(3), pages 381-416, December.
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  19. Costas Milas, 1998. "Demand for Greek imports using multivariate cointegration techniques," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 30(11), pages 1483-1492.
  20. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  21. Bahmani-Oskooee, Mohsen & Rhee, Hyun-Jae, 1997. "Structural change in import demand behavior, the Korean experience: a reexamination," Journal of Policy Modeling, Elsevier, Elsevier, vol. 19(2), pages 187-193, April.
  22. Mohsen Bahmani-Oskooee & Orhan Kara, 2003. "Relative Responsiveness of Trade Flows to a Change in Prices and Exchange Rate," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(3), pages 293-308.
  23. Dipendra Sinha, 1997. "Determinants of Import Demand in Thailand," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(4), pages 73-873.
  24. Tuck Cheong Tang, 2008. "Aggregate Import Demand Function for Japan: A Cointegration Re-investigation," Global Economic Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(3), pages 363-377.
  25. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
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