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Foreign Trade Regimes and Import Demand Function: Evidence from Sri Lanka

Author

Listed:
  • M. Shahe Emran

    (Department of Economics, Stanford University)

  • Forhad Shilpi

    (World Bank)

Abstract

Time series data for Sri Lanka span periods of pervasive trade and exchange restrictions along with periods of liberalized trade. This paper implements a structural econometric model of aggregate imports which incorporates the implications of the shifts in the policy regime. The results demonstrate that the model outperforms the existing alternatives both on statistical and economic grounds. The estimated elasticities, in contrast to the available evidence, have correct signs, high statistical significance, and plausible magnitudes. The implications for policy analysis like calculation of equilibrium exchange rate are discussed. Special Note: If you are looking for the paper titled "Import Demand Under Trade and Exchange Rate Restrictions: A Structural Econometric Approach with an Application to India", it has been withdrwan temporarily. A revised version will be posted in near future.

Suggested Citation

  • M. Shahe Emran & Forhad Shilpi, 2001. "Foreign Trade Regimes and Import Demand Function: Evidence from Sri Lanka," International Trade 0012002, University Library of Munich, Germany, revised 04 Apr 2002.
  • Handle: RePEc:wpa:wuwpit:0012002
    Note: Type of Document - Tex; prepared on IBM PC ; to print on HP; figures: none. Tables included.. none
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0012/0012002.pdf
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    References listed on IDEAS

    as
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    2. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    3. Adnan Mazarei, 1995. "Imports Under a Foreign Exchange Constraint; The Case of the Islamic Republic of Iran," IMF Working Papers 95/97, International Monetary Fund.
    4. Morris Goldstein & Mohsin S. Khan, 2017. "Income and Price Effects in Foreign Trade," World Scientific Book Chapters,in: TRADE CURRENCIES AND FINANCE, chapter 1, pages 3-81 World Scientific Publishing Co. Pte. Ltd..
    5. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.
    6. Mohammad Hashem Pesaran & Yongcheol Shin & Richard J Smith, 1999. "Bounds Testing Approaches to the Analysis of Long Run Relationships," ESE Discussion Papers 46, Edinburgh School of Economics, University of Edinburgh.
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    8. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-328, August.
    9. Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-264, May.
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    11. Athukorala, Prema-chandra & Rajapatirana, Sarath, 2000. "Liberalization and Industrial Transformation: Lessons from the Sri Lankan Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 543-572, April.
    12. Clarida, Richard H, 1994. "Cointegration, Aggregate Consumption, and the Demand for Imports: A Structural Econometric Investigation," American Economic Review, American Economic Association, vol. 84(1), pages 298-308, March.
    13. Bahmani-Oskooee, Mohsen & Niroomand, Farhang, 1998. "Long-run price elasticities and the Marshall-Lerner condition revisited," Economics Letters, Elsevier, vol. 61(1), pages 101-109, October.
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    15. Shahe Emran, M. & Shilpi, Forhad, 1996. "Foreign exchange rationing and the aggregate import demand function," Economics Letters, Elsevier, vol. 51(3), pages 315-322, June.
    16. Bertola, Giuseppe & Faini, Riccardo, 1990. "Import demand and non-tariff barriers: The impact of trade liberalization : An application to Morocco," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 269-286, November.
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    More about this item

    Keywords

    Trade Policy; Import demand; Sri Lanka; Cointegration; Intertemporal elasticity of substitution;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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