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Import Demand in Heterogeneous Panel Setting

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  • Harb, Nasri

Abstract

To study the elasticities of import demand function, we build a heterogeneous panel with data of 40 counties and use panel unit root tests (Im, Pesaran and Shin, 1997) and panel cointegration tests (Pedroni, forthcoming). We test our model with two previously used activity variables: GDP and GDP minus Export for a performance comparison. To estimate our elasticities, we make use of two modified panel version of FMOLS and DOLS developed by Pedroni (1996, 2000, 2001). Our tests prove that GDP outperforms GDP minus Exports as an activity variable in the cointegration context. FMOLS and DOLS give close results when we do individual estimates. When we use between-dimension estimators, we get conflicting results. Hence, we split our sample into developed and developing groups and show that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous results in the literature.

Suggested Citation

  • Harb, Nasri, 2005. "Import Demand in Heterogeneous Panel Setting," MPRA Paper 13622, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13622
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    References listed on IDEAS

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    1. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
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    5. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
    6. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    7. Peter C. B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Econometrica, Econometric Society, vol. 67(5), pages 1057-1112, September.
    8. Mr. Abdelhak S Senhadji, 1997. "Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis," IMF Working Papers 1997/132, International Monetary Fund.
    9. 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.
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    Cited by:

    1. Antonis Adam & Margarita Katsimi & Thomas Moutos, 2012. "Inequality and the import demand function," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 675-701, October.
    2. Yoichi Matsubayashi & Shigeyuki Hamori, 2009. "Empirical analysis of import demand behavior of least developed countries," Economics Bulletin, AccessEcon, vol. 29(2), pages 1443-1458.
    3. James J. Forest & Paul Turner, 2013. "Alternative estimators of cointegrating parameters in models with nonstationary data: an application to US export demand," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 629-636, February.
    4. Marco Giansoldati & Tullio Gregori, 2018. "Trade Collapses and Trade Slowdowns: Evidence from Some Central and Eastern European Countries," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 16(1 (Spring), pages 3-18.
    5. Kamps, Annette & Beck, Roland, 2009. "Petrodollars and imports of oil exporting countries," Working Paper Series 1012, European Central Bank.
    6. Nelson Modeste, 2011. "An Empirical Analysis of the Demand for Imports in Three CARICOM Member Countries: An Application of the Bounds Test for Cointegration," The Review of Black Political Economy, Springer;National Economic Association, vol. 38(1), pages 53-62, March.
    7. Zhao, Bingyu & Yang, Wanping, 2020. "Does financial development influence CO2 emissions? A Chinese province-level study," Energy, Elsevier, vol. 200(C).
    8. Polbin, Andrey & Fokin, Nikita, 2020. "Modeling the dynamics of import in the Russian Federation using the error correction model," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 59, pages 88-112.
    9. Thomas Reininger, 2008. "Factors Driving Import Demand in Selected Central, Eastern and Southeastern European Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 100-125.
    10. Esposito, Piero & Messori, Marcello, 2019. "Competitive or recession gains? On the recent macroeconomic rebalances in the EMU," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 147-167.
    11. Ioanna Konstantakopoulou, 2020. "Further Evidence on Import Demand Function and Income Inequality," Economies, MDPI, vol. 8(4), pages 1-12, October.
    12. Gregori, Tullio, 2021. "Protectionism and international trade: A long-run view," International Economics, Elsevier, vol. 165(C), pages 1-13.

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    More about this item

    Keywords

    Import Demand elasticities; Time series; Panel cointegration; FMOLS; DOLS;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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