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A Reexamination Of South Korea¡¯S Aggregate Import Demand Function: The Bounds Test Analysis

  • Tsangyao Chang

    (Department of Economics, Feng Chia University)

  • Yuan-Hong Ho

    ()

    (Department of Public Finance, Feng Chia University)

  • Chiung-Ju Huang

    (Department of Public Finance, Feng Chia University)

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.

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Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 30 (2005)
Issue (Month): 1 (June)
Pages: 119-128

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Handle: RePEc:jed:journl:v:30:y:2005:i:1:p:119-128
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  1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  2. Tuck Cheong Tang & Mahendhiran Nair, 2002. "A cointegration analysis of Malaysian import demand function: reassessment from the bounds test," Applied Economics Letters, Taylor & Francis Journals, vol. 9(5), pages 293-296.
  3. Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-50, August.
  4. Farley, John U. & Hinich, Melvin & McGuire, Timothy W., 1975. "Some comparisons of tests for a shift in the slopes of a multivariate linear time series model," Journal of Econometrics, Elsevier, vol. 3(3), pages 297-318, August.
  5. Dilip Dutta & Nasiruddin Ahmed, 1999. "An aggregate import demand function for Bangladesh: a cointegration approach," Applied Economics, Taylor & Francis Journals, vol. 31(4), pages 465-472.
  6. Salas, Javier, 1982. "Estimation of the structure and elasticities of Mexican imports in the period 1961-1979," Journal of Development Economics, Elsevier, vol. 10(3), pages 297-311, June.
  7. Bardsen, G., 1988. "On The Estimation Of Long Run Coefficients In Error Correction Models," Papers 03-88, Norwegian School of Economics and Business Administration-.
  8. Costas Milas, 1998. "Demand for Greek imports using multivariate cointegration techniques," Applied Economics, Taylor & Francis Journals, vol. 30(11), pages 1483-1492.
  9. Dipendra Sinha, 1997. "Determinants of Import Demand in Thailand," International Economic Journal, Taylor & Francis Journals, vol. 11(4), pages 73-873.
  10. Tuck Cheong Tang, 2008. "Aggregate Import Demand Function for Japan: A Cointegration Re-investigation," Global Economic Review, Taylor & Francis Journals, vol. 37(3), pages 363-377.
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