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Liquidity effects on consumers’ imports in Trinidad and Tobago

Listed author(s):
  • Michael Browne

    ()

    (The George Washington University)

This paper examines the effects of liquidity on the demand for imports of non-durable consumers’ goods in Trinidad and Tobago. A parsimonious vector equilibrium correction model (VEqCM) is used to test the hypotheses that liquidity has both long- and short-run effects. The multivariate cointegration approach of Johansen and Juselius (1990) is used to determine long-run relations and general to specific (Gets) modeling, Autometrics in particular, to determine system dynamic specification. Cointegration analysis reveals a long-run relation among consumers’ imports, output, liquidity and relative prices. Gets modeling also reveals significant short-run liquidity effects and furthermore asymmetric short-run foreign and domestic price effects. The VEqCM seems a sufficient approximation of the underlying data generation process, demonstrates desirable statistical properties and empirically constant parameters, encompasses the findings of previous specifications and produces reliable forecasts.

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File URL: https://www2.gwu.edu/~forcpgm/2016-005.pdf
File Function: First version, 2016
Download Restriction: no

Paper provided by The George Washington University, Department of Economics, Research Program on Forecasting in its series Working Papers with number 2016-005.

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Length: 37 pages
Date of creation: May 2016
Handle: RePEc:gwc:wpaper:2016-005
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Web page: https://www2.gwu.edu/~forcpgm
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  1. Osborn, Denise R, et al, 1988. "Seasonality and the Order of Integration for Consumption," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 50(4), pages 361-377, November.
  2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  3. Campos, Julia & Ericsson, Neil R. & Hendry, David F., 1996. "Cointegration tests in the presence of structural breaks," Journal of Econometrics, Elsevier, vol. 70(1), pages 187-220, January.
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  8. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  9. Osborn, Denise R., 1990. "A survey of seasonality in UK macroeconomic variables," International Journal of Forecasting, Elsevier, vol. 6(3), pages 327-336, October.
  10. Ericsson, Neil R., 1995. "Conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 69(1), pages 159-171, September.
  11. Philip Hans Franses & Bart Hobijn, 1997. "Critical values for unit root tests in seasonal time series," Journal of Applied Statistics, Taylor & Francis Journals, vol. 24(1), pages 25-48.
  12. Sargan, J D, 1980. "Some Tests of Dynamic Specification for a Single Equation," Econometrica, Econometric Society, vol. 48(4), pages 879-897, May.
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  14. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
  15. Nelson Modeste, 2011. "An Empirical Analysis of the Demand for Imports in Three CARICOM Member Countries: An Application of the Bounds Test for Cointegration," The Review of Black Political Economy, Springer;National Economic Association, vol. 38(1), pages 53-62, March.
  16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  17. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
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