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Estimating Import-Demand Function in ARDL Framework


  • Abdul Rashid
  • Tayyaba Razzaq


We develop a structural econometric model of import demand for Pakistan, with binding foreign exchange constraint. ARDL and DOLS techniques are used to estimate the log-run coefficients of price and income elasticities. The empirical results from ARDL bound testing approach and Johansen’s method for cointegration show strong evidence of the existence of a long-run stable relationship among the variables included in the import demand model. The price and income elasticity estimates have correct signs and are statistically significant. The coefficient of scarcity premium, as it appeared statistically significant with correct sign, confirms the presence of a binding foreign exchange constraint on aggregate import demand, particularly before the period of trade liberalization.

Suggested Citation

  • 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.
  • Handle: RePEc:eei:rpaper:eeri_rp_2010_15

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    References listed on IDEAS

    1. 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.
    2. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, June.
    3. Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May.
    4. Johansen, Søren, 1995. "A Stastistical Analysis of Cointegration for I(2) Variables," Econometric Theory, Cambridge University Press, vol. 11(01), pages 25-59, February.
    5. Narayan, Paresh Kumar & Narayan, Seema, 2005. "Estimating income and price elasticities of imports for Fiji in a cointegration framework," Economic Modelling, Elsevier, vol. 22(3), pages 423-438, May.
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    Cited by:

    1. Ciaian, Pavel & Kancs, d'Artis & Pokrivcak, Jan, 2011. "Comparative Advantages, Transaction Costs and Factor Content in Agricultural Trade: Empirical Evidence from the CEE - Vantaggi comparati, costi di transazione e contenuto dei fattori nel commercio agr," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(1), pages 67-101.
    2. Abdul Rashid & Tayyaba Razzaq, 2013. "An Estimation of Structural Import Demand Function for Pakistan," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 156-175.
    3. Zunia Saif Tirmazee & Resham Naveed, 2014. "Reviewing Pakistan’s Import Demand Function: A Time-Series Analysis, 1970–2010," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 371-393, September.

    More about this item


    Import Demand; Foreign Exchange Constraint; ARDL; DOLS; Pakistan.;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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