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Import Demand in Heterogeneous Panel Setting

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  • Harb, Nasri

Abstract

To study the elasticities of import demand function, we build a heterogeneous panel with data of 40 counties and use panel unit root tests (Im, Pesaran and Shin, 1997) and panel cointegration tests (Pedroni, forthcoming). We test our model with two previously used activity variables: GDP and GDP minus Export for a performance comparison. To estimate our elasticities, we make use of two modified panel version of FMOLS and DOLS developed by Pedroni (1996, 2000, 2001). Our tests prove that GDP outperforms GDP minus Exports as an activity variable in the cointegration context. FMOLS and DOLS give close results when we do individual estimates. When we use between-dimension estimators, we get conflicting results. Hence, we split our sample into developed and developing groups and show that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous results in the literature.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13622.

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Date of creation: 2005
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Publication status: Published in Applied Economics 20.37(2005): pp. 2407-2415
Handle: RePEc:pra:mprapa:13622

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Keywords: Import Demand elasticities; Time series; Panel cointegration; FMOLS; DOLS;

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  1. 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.
  2. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
  3. 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.
  4. 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.
  5. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.
  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. Dilip Dutta & Nasiruddin Ahmed, 2001. "An Aggregate Import Demand Function for India: A Cointegration Analysis," ASARC Working Papers 2001-02, The Australian National University, Australia South Asia Research Centre.
  8. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
  9. 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.
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Cited by:
  1. Yoichi Matsubayashi & Shigeyuki Hamori, 2009. "Empirical analysis of import demand behavior of least developed countries," Economics Bulletin, AccessEcon, vol. 29(2), pages 1443-1458.
  2. 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.
  3. Beck, Roland & Kamps, Annette, 2009. "Petrodollars and imports of oil exporting countries," Working Paper Series 1012, European Central Bank.
  4. Antonis Adam & Margarita Katsimi & Thomas Moutos, 2012. "Inequality and the import demand function," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 675-701, October.
  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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