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Intraperiod and Intertemporal Substitution in Import Demand

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Abstract

In this paper, we study intraperiod and intertemporal substitution in U.S. import demand using a two-good version of the permanent-income model that allows for nonseparability between domestic and imported goods consumption. The intratemporal elasticity of substitution between the two goods is estimated to be about 1.09 while the intertemporal elasticity of substitution of the composite good is estimated to be statistically larger than the intraperiod measure and lie between 1.36 to 1.39. We then explore the implications of these estimates for intraperiod and intertemporal substitution in the presence of an exogenous real exchange rate movement. Dans ce papier, nous étudions la substitution intrapériode et intertemporelle de la demande d'importations des États-Unis en utilisant une version à deux biens du modèle du revenu permanent qui permet de tenir compte de la non-séparabilité entre les biens de consommation domestiques et importés. L'élasticité intratemporelle est estimée à environ 1.09 tandis que l'élasticité de substitution intertemporelle du bien composé est statistiquement plus élevée que la mesure intrapériode et se trouve entre 1.36 et 1.39. Par la suite, nous explorons les implications de ces estimations pour la substitution intrapériode et intertemporelle dans la présence d'un mouvement exogène du taux de change réel.

Suggested Citation

  • Robert A. Amano & Wai-Ming Ho & Tony S. Wirjanto, 1999. "Intraperiod and Intertemporal Substitution in Import Demand," Cahiers de recherche CREFE / CREFE Working Papers 84, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:84
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rashid, Abdul & Razzaq, Tayyaba, 2010. "Estimating Import-Demand Function in ARDL Framework: The Case of Pakistan," MPRA Paper 26079, University Library of Munich, Germany.
    2. Abdul Rashid & Tayyaba Razzaq, 2010. "Estimating Import-Demand Function in ARDL Framework," EERI Research Paper Series EERI_RP_2010_15, Economics and Econometrics Research Institute (EERI), Brussels.
    3. Tony Wirjanto, 2004. "Exploring consumption-based asset pricing model with stochastic-trend forcing processes," Applied Economics, Taylor & Francis Journals, vol. 36(14), pages 1591-1597.
    4. Chuanglian Chen & Guojin Chen & Shujie Yao, "undated". "Do Imports Crowd Out Domestic Consumption? A Comparative Study of China, Japan and Korea," Discussion Papers 11/03, University of Nottingham, GEP.
    5. Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, pages 107-134.
    6. Rashid, Abdul & Razzaq, Tayyaba, 2010. "Estimating Import-Demand Function in ARDL Framework: The Case of Pakistan," MPRA Paper 23702, University Library of Munich, Germany.

    More about this item

    Keywords

    permanent income; nonseparable preferences; cointegration; consumption;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F10 - International Economics - - Trade - - - General

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