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Liquidity effects on consumers’ imports in Trinidad and Tobago

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  • Michael Browne

    () (The George Washington University)

Abstract

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.

Suggested Citation

  • Michael Browne, 2016. "Liquidity effects on consumers’ imports in Trinidad and Tobago," Working Papers 2016-005, The George Washington University, Department of Economics, Research Program on Forecasting.
    • Handle: RePEc:gwc:wpaper:2016-005
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    File URL: https://www2.gwu.edu/~forcpgm/2016-005.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Trinidad and Tobago; imports; non-durable consumers’ goods; liquidity; error correction model; cointegration; exogeneity; systems modeling; systems forecasts;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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