Modelling the Demand for Imports and Domestic Output
The paper models domestic output over imports in Norway’s expenditure on manufactures. Using Johansen’s (1988, 1991) method, we obtain a cointegrating vector between the output-imports ratio, relative prices and a proxy for international specialisation. This vector enters a conditional equilibrium correction model of the output-imports ratio; a model which also includes short-run influences of relative prices and a negative coefficient for domestic capacity utilisation. The utilisation coefficient aside, we do not find significant activity effects on the output-imports ratio. Lastly, the model passes several tests of the Lucas critique.
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- Gerrard, W J & Godfrey, L G, 1998. "Diagnostic Checks for Single-Equation Error-Correction and Autoregressive Distributed Lag Models," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 222-37, March.
- Gregory, R G, 1971. "United States Imports and Internal Pressure of Demand: 1948-68," American Economic Review, American Economic Association, vol. 61(1), pages 28-47, March.
- Joseph E. Gagnon, 1988.
"Adjustment costs and international trade dynamics,"
International Finance Discussion Papers
321, Board of Governors of the Federal Reserve System (U.S.).
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