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Analyzing the Import Demand Function with Expenditure Components: Evidence from Pakistan

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  • Sadaf Majeed

    ()

  • Abdul Waheed

    ()

Abstract

This study highlights the responsiveness of import demand in the context of aggregate expenditure components in Pakistan over the period of 1974–2009. The study uses Johansen multivariate cointegration analysis and estimates an error correction model to drive the long-run and short run elasticities of the import demand behavior. The cointegration results provide a strong empirical validity of the presence of long run elasticities between import and macro-components. In the long-run, the consumption expenditure is the main dominant determinants of the movements in import demand in Pakistan. In the short-run, the consumption and investment expenditures are the major determinants of import demand while the import demand is not sensitive to relative price. Moreover, the parameter stability tests confirm the stability of the model, and the sensitivity analysis confirms the robustness of initial results. Copyright Springer-Verlag Wien 2012

Suggested Citation

  • Sadaf Majeed & Abdul Waheed, 2012. "Analyzing the Import Demand Function with Expenditure Components: Evidence from Pakistan," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(2), pages 245-259, November.
  • Handle: RePEc:spr:trstrv:v:19:y:2012:i:2:p:245-259 DOI: 10.1007/s11300-012-0236-4
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    References listed on IDEAS

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    1. N. Emmanuel Tambi, 1998. "Trade liberalization effects on commodity imports in Cameroon," Journal of Economic Studies, Emerald Group Publishing, vol. 25(3), pages 193-202, September.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    3. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    4. Dipendra Sinha, 1997. "Determinants of Import Demand in Thailand," International Economic Journal, Taylor & Francis Journals, vol. 11(4), pages 73-873.
    5. Zelal Kotan & Mesut Saygili, 1999. "Estimating an Import Function for Turkey," Discussion Papers 9909, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Seema Narayan & Paresh Kumar Narayan, 2005. "An empirical analysis of Fiji's import demand function," Journal of Economic Studies, Emerald Group Publishing, vol. 32(2), pages 158-168, May.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    8. Fengbao Yin & Shigeyuki Hamori, 2011. "Estimating the import demand function in the autoregressive distributed lag framework: The case of China," Economics Bulletin, AccessEcon, vol. 31(2), pages 1576-1591.
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    More about this item

    Keywords

    Consumption; Imports; Cointegration; E2; F10; F21;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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