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Estimating Argentina''s imports elasticities

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  • A Duarte
  • J L Nicolini-Llosa
  • I Paya

Abstract

The aim of this paper is to provide new estimates of the income and price elasticities of the demand for imports in Argentina. Given the non-stationary nature of the data and to avoid problems of spurious regression we applied co-integration techniques to quarterly data over the period 1970:1 -2005:4. Three results are worth mentioning. First, there is a statistically significant and stable long-run relationship between the level of imports, real income and the exchange rate. Second, in the long run, a very high-income elasticity and a low real exchange rate elasticity determine the demand for imports. This result confirms an old argument concerning Argentina's constraint to economic growth as originally developed by the well-known structural approach. Third, while the linear error correction models show problems of misspecification, a non-linear STAR model demonstrates that deviations from long-run equilibrium adjust not only in a non-linear way but also at a slower speed of adjustment than the linear one.

Suggested Citation

  • A Duarte & J L Nicolini-Llosa & I Paya, 2007. "Estimating Argentina''s imports elasticities," Working Papers 583372, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:583372
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    References listed on IDEAS

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