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Empirical Analysis of Import Demand Behavior of Least Developed Countries

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  • Yoichi, Matsubayashi
  • Shigeyuki, Hamori

Abstract

This paper examines the long-run stability of import demand function in least developed countries (LDCs) using recently developed panel cointegration techniques. We test for cointegration using two data sets: a) annual data for 15 countries from 1965 to 2004; and b) annual data for 22 countries from 1984 to 2004. We find that cointegration is present and that, indeed, there is a stable import demand function in these economies. The income elasticity ranges from 1.26 to 1.69 and price elasticity ranges from -0.72 to -0.75.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17266.

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Date of creation: Sep 2009
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Publication status: Published in Economics Bulletin 2.29(2009): pp. 1460-1475
Handle: RePEc:pra:mprapa:17266

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Keywords: import demand; panel unit root; panel cointegration; LDCs;

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  1. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  3. Reinhart, Carmen, 1994. "Devaluation, Relative Prices, and International Trade," MPRA Paper 13708, University Library of Munich, Germany.
  4. Harb, Nasri, 2005. "Import Demand in Heterogeneous Panel Setting," MPRA Paper 13622, University Library of Munich, Germany.
  5. Dilip Dutta & Nasiruddin Ahmed, 2004. "An aggregate import demand function for India: a cointegration analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 607-613.
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  8. Urbain, J-P., 1988. "Error Correction Models For Aggregate Imports: The Case Of Two Small Open European Economies," Papers, Liege - Centre de Recherches Economiques et Demographiques 8804, Liege - Centre de Recherches Economiques et Demographiques.
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  10. Masih, Rumi & Masih, Abul M. M., 2000. "A Reassessment of Long-Run Elasticities of Japanese Import Demand," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 625-639, September.
  11. 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.
  12. 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.
  13. Bahmani-Oskooee, Mohsen & Ratha, Artatrana, 2008. "Exchange rate sensitivity of US bilateral trade flows," Economic Systems, Elsevier, vol. 32(2), pages 129-141, June.
  14. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
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  16. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
  17. 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.
  18. Ivohasina Fizara Razafimahefa & Shigeyuki Hamori, 2005. "Import Demand Function: Some Evidence from Madagascar and Mauritius," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 14(3), pages 411-434, September.
  19. Faini, Riccardo & Pritchett, Lant & Clavijo, Fernando, 1988. "Import demand in developing countries," Policy Research Working Paper Series 122, The World Bank.
  20. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
  21. Hamori, Shigeyuki & Matsubayashi, Yoichi, 2001. "An empirical analysis on the stability of Japan's aggregate import demand function," Japan and the World Economy, Elsevier, vol. 13(2), pages 135-144, April.
  22. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  23. Carone, Giuseppe, 1996. "Modeling the U.S. demand for imports through cointegration and error correction," Journal of Policy Modeling, Elsevier, vol. 18(1), pages 1-48, February.
  24. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
  25. Yoichi Matsubayashi & Shigeyuki Hamori, 2003. "Some international evidence on the stability of aggregate import demand function," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(13), pages 1497-1504.
  26. 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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Cited by:
  1. Shigeyuki, Hamori & Yoichi, Matsubayashi, 2009. "Empirical Analysis of Export Demand Behavior of LDCs: Panel Cointegration Approach," MPRA Paper 17316, University Library of Munich, Germany.

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