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The asymmetric effect of income on import demand in Greece

Author

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  • Ioanna C. Bardakas

    (Bank of Greece)

Abstract

This paper presents empirical evidence supporting the argument that a significant asymmetry exists in the income elasticity of Greek imports. Using multivariate cointegration techniques for the estimation of long-run imports we derive short-run error correction equations that separate income elasticities for periods when income is rising and periods when it is falling. The empirical results show that the response of imports to rising income is stronger than the response of imports to falling income. The important policy implication of this asymmetry is that a consecutively positive growth would lead imports to continuously increase causing the current account deficit to persistently widen.

Suggested Citation

  • Ioanna C. Bardakas, 2013. "The asymmetric effect of income on import demand in Greece," Working Papers 159, Bank of Greece.
    • Handle: RePEc:bog:wpaper:159
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    References listed on IDEAS

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    Cited by:

    1. Mubasher Iqbal & Rukshana Kalim & Noman Arshed, 2019. "Domestic and Foreign Incomes and Trade Balance - A Case of South Asian Economies," Asian Development Policy Review, Asian Economic and Social Society, vol. 7(4), pages 355-368, December.

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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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