Disaggregated Imports Demand Functions
An Empirical Analysis for Pakistan
Keywords:
Imports, Commodities, Elasticities, GMM
Abstract
Given the importance of international trade in the economic performance of a country, voluminous research work has been carried out on the determinants of aggregate exports and imports. The present study departs from the conventional approach by analyzing demand of imports in a commodity-wise disaggregated fashion. As different products respond differently to trade policies and exchange rates, therefore policy makers can focus on the particular products when designing their policies for imports. Specifically, this study attempts to analyze the impact of prices, income level, foreign exchange reserves, exchange rate and trade liberalization program on 26 commodities defined by SITC 3-digit classification in which Pakistan has been most often a net importer. Using data for the period 1982 to 2010, GMM estimates reveal inelastic response of the major commodities to their own prices and are growth driven.
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References
Afzal, M. (2001). Book Review: Import functions for Pakistan–a simultaneous equation approach. The Lahore Journal of Economics, 6(2), 109-116.
Afzal, M. (2007). Exchange rate response of import demand in Pakistan. Sarhad Journal of Agriculture, 23(4), 1181-1186.
Ahmed, C. (2011). Aggregate Imports and Expenditure Components in Pakistan: an Empirical Analysis. Pakistan Business Reviews, 13(3), 488-512.
Alam, S., & Ahmad, Q. M. (2011). Exchange rate volatility and Pakistan’s bilateral imports from major sources: An application of ARDL approach. International Journal of Economics and Finance, 3(2), 245-254.
Alam, S., & Ahmed, Q. M. (2010). Exchange rate volatility and Pakistan’s import demand: an application of autoregressive distributed lag model. International Research Journal of Finance and Economics, 48(1), 7-22.
Al-Hazaimeh, A., Al-Hyari, K., & AL-Nasour, M. (2011). Determinants of aggregate imports in Jordan: Empirical evidence (1976-2008). Journal of Economic Development, Management, IT, Finance, and Marketing, 3(1), 18-38.
Arize, A. C., Malindretos, J., & Grivoyannis, E. (2004). Foreign exchange reserves and import demand in a developing economy: the case of Pakistan. International Economic Journal, 18(2), 259-274. https://doi.org/10.1080/1016873042000228376.
Athukorala, P., & Menon, J. (1995). Modeling manufactured imports: Methodological issues with evidence from Australia. Journal of Policy Modeling, 17(6), 667-675. https://doi.org/10.1016/0161-8938(95)00023-2.
Babatunde, M. A. and Egwaikhide, F. O. (2010) “Explaining Nigeria’s Import Demand Behaviour: A Bound Testing Approach” International Journal of Development Issues 9 (2), 167-187.
Baluch, K. A., & Bukhari, S. K. H. (2012). Price and income elasticity of imports: The case of Pakistan (Working paper No. 48). State Bank of Pakistan. Retrieved from https://ideas.repec.org/p/sbp/wpaper/48.html.
Carone, G. (1996). Modeling the US demand for imports through cointegration and error correction. Journal of Policy Modeling, 18(1), 1-48. https://doi.org/10.1016/0161-8938(95)00058-5.
Cheong, T. T. (2002). Disaggregated import demand and expenditure components in Malaysia: An empirical analysis. Malaysian Journal of Economic Studies, 39(1/2), 47-63.
Grullon, S. (2012). Price and income elasticities of disaggregated import demand: bounds test results for the Dominican Republic. Journal of Economics and Sustainable Development, 3(4), 13-22.
Hemphill, W. (1974). The Effect of Foreign Exchange Receipts on Imports of Less Developed Countries. Staff Papers (International Monetary Fund), 21(3), 637-677. https://doi.org/10.2307/3866552.
Jones, C. (2008). Aggregate and sector import price elasticities for a sample of African countries (CREDIT Discussion paper No. 08/03). Centre for Research in Economic Development and International Trade. The University of Nottingham.
Jones, C., & Morrissey, O. (2008). .Are imports in Africa responsive to tariff reductions? (CREDIT Discussion paper No. 08/02). Centre for Research in Economic Development and International Trade. The University of Nottingham.
Junz, H. B., & Rhomberg, R. R. (1973). Price competitiveness in export trade among industrial countries. The American Economic Review, 63(2), 412-418.
Kabir, R. (1988). Estimating import and export demand function: The case of Bangladesh. The Bangladesh Development Studies, 16(4), 115-127.
Khan, M. S. (1975).The structure and behavior of imports of Venezuela. The Review of Economics and Statistics, 57(2), 221-224.
Moran, C. (1989). Imports under a foreign exchange constraint. The World Bank Economic Review, 3(2), 279-295. https://doi.org/10.1093/wber/3.2.279.
Pattichis, C. A. (1999). Price and income elasticities of disaggregated import demand: Results from UECMs and an application. Applied Economics, 31(9), 1061-1071. https://doi.org/10.1080/000368499323544.
Price, J. E., &Thornblade, J. B. (1972). US import demand functions disaggregated by country and commodity. Southern Economic Journal, 39(1), 46-57. https://doi.org/10.2307/1056224.
Rehman, H. U. (2007). An econometric estimation of traditional import demand function for Pakistan. Pakistan Economic and Social Review, 45(2), 245-256.
Sarmad, K., & Mahmood, R. (1987). Disaggregated import demand functions for Pakistan. The Pakistan Development Review, 26(1), 71-80.
Sarmad, K., Mahmood, R., & Syed, A. A. (1985).Price and income elasticities of consumer goods imports of Pakistan [with comments].The Pakistan Development Review, 24(3/4), 453-462.
Sultan, Z. A. (2011). Foreign exchange reserves and India’s import demand: A cointegration and vector error correction analysis. International Journal of Business and Management, 6(7), 69-76. https://doi.org/10.5539/ijbm.v6n7p69.
Sun, W., Qi, Z., &Jia, N. (2010, August). Import Demand of Crude Oil and Economic Growth in China: Evidence from the ARDL Model. In Business Intelligence and Financial Engineering (BIFE): 2010 Third International Conference. Hong Kong; China (pp. 314-318). http://doi.ieeecomputersociety.org/10.1109/BIFE.2010.80.
Tambi, N. E (1998). Trade liberalization effects on commodity imports in Cameroon. Journal of Economic Studies, 25(3), 193-202. https://doi.org/10.1108/01443589810215342.
Tennakeen, T. M. U. (2012). Price and income elasticities of disaggregated import demand in Sri Lanka. Staff Studies, 40((1-2), 59-78.
Thomakos, D. D. & Ulubaşoglu, M.A. (2002). The Impact of Trade Liberalization on Import Demand. Journal of Economic & Social Research, 4(1), 1-26.
Thomas, D. E., & Grosse, R. E. (2005). Explaining imports and exports: A focus on non-maquiladora Mexican firms. Multinational Business Review, 13(3), 25-40.
Warner, D., & Kreinin, M. E. (1983). Determinants of international trade flows. The Review of Economics and Statistics, 65(1), 96-104.
Wilson, J. F., & Takacs, W. E. (1979). Differential responses to price and exchange rate influences in the foreign trade of selected industrial countries. The Review of Economics and Statistics, 61(2), 267-279.
Yasmin, B., Jehan, Z. & Chaudhary M.A. (2006). (2006). Trade liberalization and economic development: Evidence from Pakistan. The Lahore Journal of Economics 11(1), 19-34.
Afzal, M. (2007). Exchange rate response of import demand in Pakistan. Sarhad Journal of Agriculture, 23(4), 1181-1186.
Ahmed, C. (2011). Aggregate Imports and Expenditure Components in Pakistan: an Empirical Analysis. Pakistan Business Reviews, 13(3), 488-512.
Alam, S., & Ahmad, Q. M. (2011). Exchange rate volatility and Pakistan’s bilateral imports from major sources: An application of ARDL approach. International Journal of Economics and Finance, 3(2), 245-254.
Alam, S., & Ahmed, Q. M. (2010). Exchange rate volatility and Pakistan’s import demand: an application of autoregressive distributed lag model. International Research Journal of Finance and Economics, 48(1), 7-22.
Al-Hazaimeh, A., Al-Hyari, K., & AL-Nasour, M. (2011). Determinants of aggregate imports in Jordan: Empirical evidence (1976-2008). Journal of Economic Development, Management, IT, Finance, and Marketing, 3(1), 18-38.
Arize, A. C., Malindretos, J., & Grivoyannis, E. (2004). Foreign exchange reserves and import demand in a developing economy: the case of Pakistan. International Economic Journal, 18(2), 259-274. https://doi.org/10.1080/1016873042000228376.
Athukorala, P., & Menon, J. (1995). Modeling manufactured imports: Methodological issues with evidence from Australia. Journal of Policy Modeling, 17(6), 667-675. https://doi.org/10.1016/0161-8938(95)00023-2.
Babatunde, M. A. and Egwaikhide, F. O. (2010) “Explaining Nigeria’s Import Demand Behaviour: A Bound Testing Approach” International Journal of Development Issues 9 (2), 167-187.
Baluch, K. A., & Bukhari, S. K. H. (2012). Price and income elasticity of imports: The case of Pakistan (Working paper No. 48). State Bank of Pakistan. Retrieved from https://ideas.repec.org/p/sbp/wpaper/48.html.
Carone, G. (1996). Modeling the US demand for imports through cointegration and error correction. Journal of Policy Modeling, 18(1), 1-48. https://doi.org/10.1016/0161-8938(95)00058-5.
Cheong, T. T. (2002). Disaggregated import demand and expenditure components in Malaysia: An empirical analysis. Malaysian Journal of Economic Studies, 39(1/2), 47-63.
Grullon, S. (2012). Price and income elasticities of disaggregated import demand: bounds test results for the Dominican Republic. Journal of Economics and Sustainable Development, 3(4), 13-22.
Hemphill, W. (1974). The Effect of Foreign Exchange Receipts on Imports of Less Developed Countries. Staff Papers (International Monetary Fund), 21(3), 637-677. https://doi.org/10.2307/3866552.
Jones, C. (2008). Aggregate and sector import price elasticities for a sample of African countries (CREDIT Discussion paper No. 08/03). Centre for Research in Economic Development and International Trade. The University of Nottingham.
Jones, C., & Morrissey, O. (2008). .Are imports in Africa responsive to tariff reductions? (CREDIT Discussion paper No. 08/02). Centre for Research in Economic Development and International Trade. The University of Nottingham.
Junz, H. B., & Rhomberg, R. R. (1973). Price competitiveness in export trade among industrial countries. The American Economic Review, 63(2), 412-418.
Kabir, R. (1988). Estimating import and export demand function: The case of Bangladesh. The Bangladesh Development Studies, 16(4), 115-127.
Khan, M. S. (1975).The structure and behavior of imports of Venezuela. The Review of Economics and Statistics, 57(2), 221-224.
Moran, C. (1989). Imports under a foreign exchange constraint. The World Bank Economic Review, 3(2), 279-295. https://doi.org/10.1093/wber/3.2.279.
Pattichis, C. A. (1999). Price and income elasticities of disaggregated import demand: Results from UECMs and an application. Applied Economics, 31(9), 1061-1071. https://doi.org/10.1080/000368499323544.
Price, J. E., &Thornblade, J. B. (1972). US import demand functions disaggregated by country and commodity. Southern Economic Journal, 39(1), 46-57. https://doi.org/10.2307/1056224.
Rehman, H. U. (2007). An econometric estimation of traditional import demand function for Pakistan. Pakistan Economic and Social Review, 45(2), 245-256.
Sarmad, K., & Mahmood, R. (1987). Disaggregated import demand functions for Pakistan. The Pakistan Development Review, 26(1), 71-80.
Sarmad, K., Mahmood, R., & Syed, A. A. (1985).Price and income elasticities of consumer goods imports of Pakistan [with comments].The Pakistan Development Review, 24(3/4), 453-462.
Sultan, Z. A. (2011). Foreign exchange reserves and India’s import demand: A cointegration and vector error correction analysis. International Journal of Business and Management, 6(7), 69-76. https://doi.org/10.5539/ijbm.v6n7p69.
Sun, W., Qi, Z., &Jia, N. (2010, August). Import Demand of Crude Oil and Economic Growth in China: Evidence from the ARDL Model. In Business Intelligence and Financial Engineering (BIFE): 2010 Third International Conference. Hong Kong; China (pp. 314-318). http://doi.ieeecomputersociety.org/10.1109/BIFE.2010.80.
Tambi, N. E (1998). Trade liberalization effects on commodity imports in Cameroon. Journal of Economic Studies, 25(3), 193-202. https://doi.org/10.1108/01443589810215342.
Tennakeen, T. M. U. (2012). Price and income elasticities of disaggregated import demand in Sri Lanka. Staff Studies, 40((1-2), 59-78.
Thomakos, D. D. & Ulubaşoglu, M.A. (2002). The Impact of Trade Liberalization on Import Demand. Journal of Economic & Social Research, 4(1), 1-26.
Thomas, D. E., & Grosse, R. E. (2005). Explaining imports and exports: A focus on non-maquiladora Mexican firms. Multinational Business Review, 13(3), 25-40.
Warner, D., & Kreinin, M. E. (1983). Determinants of international trade flows. The Review of Economics and Statistics, 65(1), 96-104.
Wilson, J. F., & Takacs, W. E. (1979). Differential responses to price and exchange rate influences in the foreign trade of selected industrial countries. The Review of Economics and Statistics, 61(2), 267-279.
Yasmin, B., Jehan, Z. & Chaudhary M.A. (2006). (2006). Trade liberalization and economic development: Evidence from Pakistan. The Lahore Journal of Economics 11(1), 19-34.
Published
2018-08-31
How to Cite
Muhammad, M., & Riaz, U. (2018). Disaggregated Imports Demand Functions. Journal of Quantitative Methods, 2(2), 7-27. https://doi.org/10.29145/2018/jqm/020202
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