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An Estimation of Structural Import Demand Function for Pakistan

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  • Abdul Rashid
  • Tayyaba Razzaq

Abstract

This paper estimates the structural import demand function for Pakistan using a theoretical framework developed by Emran and Shilpi (2010). ARDL and DOLS techniques are used to estimate the log-run price and income elasticities. The results of cointegration analysis provide strong evidence of the existence of a long-run stable relationship among the variables included in the model. The estimates for price and income elasticity have correct sign and are statistically significant. The coefficient of scarcity premium variable is negative and statistically significant, indicating a binding foreign exchange constraint on imports in Pakistan for pre-trade liberalization period.

Suggested Citation

  • Abdul Rashid & Tayyaba Razzaq, 2013. "An Estimation of Structural Import Demand Function for Pakistan," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 156-175.
  • Handle: RePEc:bas:econst:y:2013:i:2:p:156-175
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. 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, number 9780198288107.
    3. Tayyeb Shabbir & Riaz Mahmood, 1991. "Structural Change in the Import Demand Function for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 30(4), pages 1159-1168.
    4. Sarmad, Khwaja, 1989. "The determinants of import demand in Pakistan," World Development, Elsevier, vol. 17(10), pages 1619-1625, October.
    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. M. Shahe Emran & Forhad Shilpi, 2010. "Estimating an Import Demand Function in Developing Countries: A Structural Econometric Approach with Applications to India and Sri Lanka," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 307-319, May.
    7. Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-264, May.
    8. 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.
    9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    10. Ceglowski, Janet, 1991. "Intertemporal substitution in import demand," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 118-130, March.
    11. Dipendra Sinha, 1997. "An aggregate import demand function for Pakistan," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(1), pages 114-114, March.
    12. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    13. Khwaja Sarmad & Riaz Mahmood, 1987. "Disaggregated Import Demand Functions for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(1), pages 71-80.
    14. Abdul Rashid & Tayyaba Razzaq, 2010. "Estimating Import-Demand Function in ARDL Framework," EERI Research Paper Series EERI_RP_2010_15, Economics and Econometrics Research Institute (EERI), Brussels.
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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