A Reexamination Of South Korea¡¯S Aggregate Import Demand Function: The Bounds Test Analysis
This paper uses a robust estimation method referred to as the unrestricted error correction model - the bounds test analysis to re-analyze the long-term relationships between the demand for imports and it¡¯s determinants for South Korea over the period 1980-2000. Our results show that the volume of imports, income, and relative prices are all cointegrated. The estimated long-run (short-run) elasticities of import demand with respect to income and relative price are 1.86 (0.86) and -0.2 (-0.05), respectively. The major implication of our study is that neither monetary nor fiscal policies may be used as instruments to maintain the trade balance in South Korea¡¯s favor during this sample period.
Volume (Year): 30 (2005)
Issue (Month): 1 (June)
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