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Identifying the source of dynamics in disaggregated import data

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  • Kenneth Kasa

    (Research Department M|S 1130, Federal Reserve Bank of San Francisco, 101 Market Street, San Francisco, CA 94105, USA)

Abstract

This paper uses Kennan's (1988) model to separately identify supply-side and demand-side dynamics in US import data. Dynamics arise from both autocorrelated shocks to supply- and demand-side fundamentals, and from lagged adjustment to these shocks. The model consists of a pair of partial adjustment models in which consumers and producers each attempt to follow a stochastic target level of imports subject to a quadratic adjustment cost. The model is applied to quarterly data on US imports of seven narrowly defined commodities: Autos, Beer, Cameras, Wine, Cigars, Tea, and Soap. Two main results emerge. First, adjustment costs are important on both sides of the market. Second, supply-side adjustment costs are larger than demand-side adjustment costs. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Kenneth Kasa, 1998. "Identifying the source of dynamics in disaggregated import data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 305-320.
  • Handle: RePEc:jae:japmet:v:13:y:1998:i:3:p:305-320
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    File URL: http://qed.econ.queensu.ca:80/jae/1998-v13.3/
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    Cited by:

    1. Pavel Kadochnikov, 2006. "An Analysis of Import Substitution in Russia after the 1998 Crisis," Research Paper Series, Gaidar Institute for Economic Policy, issue 95, pages 148-148.
    2. Michael Olive, 2004. "Price Adjustment with Price Conjectures," Econometric Society 2004 Australasian Meetings 131, Econometric Society.
    3. Mita Bhattacharya & Michael Olive, 2007. "Adjustment Of Pricing: Evidence From Indian Manufacturing," Monash Economics Working Papers 04-07, Monash University, Department of Economics.

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