Imports under a foreign exchange constraint
The traditional model of import behavior -- which looks only at the gross domestic product (GDP) and real import prices as explanatory variables -- failed to predict or explain the developing countries'import slumps in the early 1980's. This paper expands on a more useful model, the Hemphill, which incorporates the traditional variables (relative prices and domestic income) with the variables introduced by Hemphill (foreign exchange receipts and international reserves). Section 2 of this paper discusses the theoretical models in the present study. The traditional model, used here as a benchmark, is presented first, and is later extended to include foreign exchange constraints. Section 3 presents the empirical estimates of the general import models that include foreign constraints, and two special cases, the Hemphill and benchmark models, using pooled, cross-section time series. Section 4 concludes that policy makers must look at the policies that affect GDP and prices and the availability of foreign exchange when trying to estimate import behavior in developing countries.
|Date of creation:||31 Mar 1988|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rudiger Dornbusch, 1981.
"Real Interest Rates, Home Goods, and Optimal External Borrowing,"
NBER Working Papers
0779, National Bureau of Economic Research, Inc.
- Dornbusch, Rudiger, 1983. "Real Interest Rates, Home Goods, and Optimal External Borrowing," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 141-53, February.
- Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
- Sundararajan, V., 1986. "Exchange rate versus credit policy : Analysis with a monetary model of trade and inflation in India," Journal of Development Economics, Elsevier, vol. 20(1), pages 75-105.
- Thursby, Jerry G & Thursby, Marie C, 1984. "How Reliable Are Simple, Single Equation Specifications of Import Demand?," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 120-28, February.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.