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Price and Income Elasticities of Aggregate Import Demand in Estonia

Author

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  • Markus Alttoa

    (Tallinn University of Technology)

Abstract

The aim of the paper is to estimate the short and long run models for aggregate importdemand in Estonia to understand how changes in the price of domestic goods and servicesrelative to foreign goods and services affect the demand for imports. The models areestimated using the Autoregressive Distributed Lag model and bounds cointegration test.The results indicate that import demand is price elastic in the short run, while the elasticityof income was found to be statistically insignificant. However, contrary to the short-runmodel, import demand is found to be income elastic, while the elasticity of the price ofdomestic goods and services relative to foreign goods and services was insignificant in thelong-run model. The elasticities found provide useful information for reference in futureresearch on import demand in Estonia as well as other European countries.JEL classification codes: C12, C32, F14, O24Keywords: Estonian imports, aggregate import demand, price elasticity, income elasticity, autoregressivedistributed lag, bounds test

Suggested Citation

  • Markus Alttoa, 2018. "Price and Income Elasticities of Aggregate Import Demand in Estonia," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 10(2).
    • Handle: RePEc:ttu:rebcee:131
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    More about this item

    Keywords

    estonian imports; aggregate import demand; price elasticity; income elasticity; autoregressivedistributed lag; bounds test;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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