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Estimating the import demand function for China

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  • Wang, Yi-Hsien
  • Lee, Jun-De

Abstract

This paper estimates the import demand elasticity for China using three fully efficient cointegrating regressions and the autoregressive distributed lag (ARDL) method. This paper is the first to accommodate the perception of global risk in an investigation of the information transmission mechanism between the relationship import demand and its determinants in China. The empirical results show that real imports are cointegrated with domestic economic activity, real effective exchange rate, and the perception of global risk. Domestic income is found to have a significantly positive effect on imports. Contrary to theory, the real effective exchange rate carries negative coefficients, which suggests that a decrease in external competitiveness (appreciation) will decrease the level of imports in the case of China. One of the reasons for this may be the tied anti-dumping duty on some import items. Since the perception of global risk adversely affects China's aggregated imports, policy-makers should consider the degree to which the perception of global risk affects the implementation of trade policies.

Suggested Citation

  • Wang, Yi-Hsien & Lee, Jun-De, 2012. "Estimating the import demand function for China," Economic Modelling, Elsevier, vol. 29(6), pages 2591-2596.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2591-2596
    DOI: 10.1016/j.econmod.2012.08.002
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    2. Weikang Zhang & Isabel K. M. Yan & Yin-Wong Cheung, 2023. "The COVID-19 pandemics and import demand elasticities: evidence from China’s customs data," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-25, December.
    3. Arzu Tay Bayramoglu & Deniz Sukruoglu, 2016. "Non-Energy Import Demand Function in Turkey: New Evidence," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(12), pages 750-761, December.
    4. Kamel Jlassi, 2015. "Modelling and Forecasting of Tunisian Current Account: Aggregate versus Disaggregate Approach," IHEID Working Papers 13-2015, Economics Section, The Graduate Institute of International Studies.
    5. He, Jingbin & Ma, Xinru & Wei, Qu, 2022. "Firm-level short selling and the local COVID-19 pandemic: Evidence from China," Economic Modelling, Elsevier, vol. 113(C).
    6. Il-Hyun Yoon & H. R. Seddighi, 2019. "Demand for Imports and Components of Final Expenditure An Empirical Study with Special Reference to the Korean Import Demand Function," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(1), pages 52-58.
    7. Chandan Sharma & Debdatta Pal, 2019. "Does Exchange Rate Volatility Dampen Imports? Commodity-Level Evidence From India," International Economic Journal, Taylor & Francis Journals, vol. 33(4), pages 696-718, October.
    8. Gozgor, Giray, 2014. "Aggregated and disaggregated import demand in China: An empirical study," Economic Modelling, Elsevier, vol. 43(C), pages 1-8.
    9. Nicholas‐Joseph Lazarou & Andreas Zervas, 2023. "Declining long‐run income elasticities and the rise of cyclicality of trade: Evidence from Greece, 1995–2018," The World Economy, Wiley Blackwell, vol. 46(6), pages 1873-1888, June.
    10. Cheng, Ka Ming, 2020. "Currency devaluation and trade balance: Evidence from the US services trade," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 20-37.
    11. Subhadip Mukherjee & Soumyatanu Mukherjee & Mamata Parhi & Kun Duan & Ahmed Usman, 2024. "A risk–return trade‐off or co‐movement? Are food processing firms risk‐averse?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2176-2192, April.
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    13. Ioanna Konstantakopoulou & Mike Tsionas, 2024. "Identifying Export Opportunities: Empirical Evidence from the Southern Euro Area Countries," Open Economies Review, Springer, vol. 35(1), pages 41-70, February.

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    More about this item

    Keywords

    Import demand; Global risk perception; ARDL; Cointegrating regression;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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