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Foreign Trade Regimes and Import Demand Function: Evidence from Sri Lanka

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Author Info
M. Shahe Emran (Department of Economics, Stanford University)
Forhad Shilpi (World Bank)

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Abstract

Time series data for Sri Lanka span periods of pervasive trade and exchange restrictions along with periods of liberalized trade. This paper implements a structural econometric model of aggregate imports which incorporates the implications of the shifts in the policy regime. The results demonstrate that the model outperforms the existing alternatives both on statistical and economic grounds. The estimated elasticities, in contrast to the available evidence, have correct signs, high statistical significance, and plausible magnitudes. The implications for policy analysis like calculation of equilibrium exchange rate are discussed. Special Note: If you are looking for the paper titled "Import Demand Under Trade and Exchange Rate Restrictions: A Structural Econometric Approach with an Application to India", it has been withdrwan temporarily. A revised version will be posted in near future.

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File URL: http://129.3.20.41/eps/it/papers/0012/0012002.pdf
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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0012002.

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Date of creation: 08 Feb 2001
Date of revision: 04 Apr 2002
Handle: RePEc:wpa:wuwpit:0012002

Note: Type of Document - Tex; prepared on IBM PC ; to print on HP; figures: none. Tables included.. none
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Web page: http://129.3.20.41

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Related research
Keywords: Trade Policy; Import demand; Sri Lanka; Cointegration; Intertemporal elasticity of substitution;

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

This paper has been announced in the following NEP Reports:

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.:
  1. Caporale, Guglielmo Maria & Pittis, Nikitas, 1999. " Efficient Estimation of Cointegrating Vectors and Testing for Causality in Vector Autoregressions," Journal of Economic Surveys, Blackwell Publishing, vol. 13(1), pages 1-35, February. [Downloadable!] (restricted)
  2. Bahmani-Oskooee, Mohsen, 1986. "Determinants of international trade flows : The Case of Developing Countries," Journal of Development Economics, Elsevier, vol. 20(1), pages 107-123. [Downloadable!] (restricted)
  3. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
  4. Shahe Emran, M. & Shilpi, Forhad, 1996. "Foreign exchange rationing and the aggregate import demand function," Economics Letters, Elsevier, vol. 51(3), pages 315-322, June. [Downloadable!] (restricted)
  5. Reinhart, Carmen, 1994. "Devaluation, Relative Prices, and International Trade," MPRA Paper 13708, University Library of Munich, Germany. [Downloadable!]
  6. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  7. Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Blackwell Publishing, vol. 7(2), pages 254-64, May.
  8. Athukorala, Prema-chandra & Rajapatirana, Sarath, 2000. "Liberalization and Industrial Transformation: Lessons from the Sri Lankan Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 543-72, April.
  9. Adnan Mazarei, 1995. "Imports Under a Foreign Exchange Constraint: The Case of the Islamic Republic of Iran," IMF Working Papers 95/97, International Monetary Fund.
  10. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier. [Downloadable!] (restricted)
  11. Bahmani-Oskooee, Mohsen & Niroomand, Farhang, 1998. "Long-run price elasticities and the Marshall-Lerner condition revisited," Economics Letters, Elsevier, vol. 61(1), pages 101-109, October. [Downloadable!] (restricted)
  12. Clarida, Richard H, 1994. "Cointegration, Aggregate Consumption, and the Demand for Imports: A Structural Econometric Investigation," American Economic Review, American Economic Association, vol. 84(1), pages 298-308, March. [Downloadable!] (restricted)
  13. David De La Croix & Jean-Pierre Urbain, 1998. "Intertemporal substitution in import demand and habit formation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(6), pages 589-612. [Downloadable!]
    Other versions:
  14. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January. [Downloadable!] (restricted)
    Other versions:
  15. Pesaran, M. Hashem & Shin, Y. & Smith, R.J., 1999. "Bounds Testing Approaches to the Analysis of Long-run Relationships," Cambridge Working Papers in Economics 9907, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  16. Bertola, Giuseppe & Faini, Riccardo, 1990. "Import demand and non-tariff barriers: The impact of trade liberalization : An application to Morocco," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 269-286, November. [Downloadable!] (restricted)
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