Import Demand in Heterogeneous Panel Setting
To study the elasticities of import demand function, we build a heterogeneous panel with data of 40 counties and use panel unit root tests (Im, Pesaran and Shin, 1997) and panel cointegration tests (Pedroni, forthcoming). We test our model with two previously used activity variables: GDP and GDP minus Export for a performance comparison. To estimate our elasticities, we make use of two modified panel version of FMOLS and DOLS developed by Pedroni (1996, 2000, 2001). Our tests prove that GDP outperforms GDP minus Exports as an activity variable in the cointegration context. FMOLS and DOLS give close results when we do individual estimates. When we use between-dimension estimators, we get conflicting results. Hence, we split our sample into developed and developing groups and show that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous results in the literature.
|Date of creation:||2005|
|Publication status:||Published in Applied Economics 20.37(2005): pp. 2407-2415|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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