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Intertemporal substitution in import demand and habit formation

  • Croix,David,de la
  • Urbain,Jean-Pierre


To study non-durable import demand, we extend previous work done by Clarida (1994) and Ceglowski (1991) by considering a two-good version of the life cycle model in which we introduce time-nonseparability in the households'' preferences. The model is estimated using quarterly data for US and France. Using the infor- mation contained in the observed stochastic and deterministic trends, we derive a cointegration restriction used to estimate curvature parameters of the instantaneous utility function. The remaining parameters are estimated in a second step by GMM. The constancy of the different parameters is investigated, both in the long and the short-run. Habit formation turns out to be an important factor of import demand.

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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 003.

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Date of creation: 1996
Date of revision:
Handle: RePEc:unm:umamet:1996003
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