Differentiating cyclical and long-term income elasticities of import demand
Determining how imports react to cyclical and secular (long term) factors has been a recurrent theme in the empirical trade literature. The evidence suggests that cyclical income elasticities of import demand are generally higher than long term elasticities - particularly for basic materials and semi-manufactured goods. Traditional models generally underestimate the cyclical response in imports, and overestimate the long term response. For example, estimates of income elasticity using a traditional import model average 1.4 and 1.2 respectively. The authors'model suggests a cyclical elasticity averaging 2.6. This result suggests that the two elasticities may differ by an even larger factor for developing countries. Relative prices generally are more important in determining import demand in Latin America and Asian-Pacific countries, in this model, but seem to have little effect in the African and (surprisingly) Mediterranean countries. In countries for which both cyclical and long-term income elasticities are significantly different from zero, relative price coefficients are also significantly different than in countries for which income parameters are not significantly different from zero.
|Date of creation:||31 May 1989|
|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.:
- Marquez, Jaime, 1988. "Cyclical and secular trade elasticities : An application to LDC exports," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 71-76, March.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
- Khan, Mohsin S & Ross, Knud Z, 1975. "Cyclical and Secular Income Elasticities of the Demand for Imports," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 357-61, August.
- Bahmani-Oskooee, Mohsen, 1986. "Determinants of international trade flows : The Case of Developing Countries," Journal of Development Economics, Elsevier, vol. 20(1), pages 107-123.
- Godfrey, L G, 1976. "Testing for Serial Correlation in Dynamic Simultaneous Equation Models," Econometrica, Econometric Society, vol. 44(5), pages 1077-84, September.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:197. 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.