Journal of Economics and Business
ISSN 2615-3726 (Online)
ISSN 2621-5667 (Print)
Published: 12 June 2020
Determinants of Import Demand in Cote d’Ivoire: The Role of Expenditure Components
Ecole Nationale Supérieure de Statistique et d’Economie Appliquée
Download Full-Text Pdf
Keywords: Import Demand, Expenditure Components, ARDL, Cote d’Ivoire
This study examines the relationship between aggregate imports and the individual components of expenditure in Cote d’Ivoire over the period from 1980 to 2017. The autoregressive distributed lag model is used to test and estimate the long and short-run import elasticities with respect to the expenditure components. The study finds evidence of a long-run relationship between aggregate imports, the expenditure components, domestic and import prices. The long-run import demand in Cote d’Ivoire is affected positively by domestic price, negatively by foreign price and positively by all expenditure components except exports which effect is insignificant. Furthermore, there are significant differences in the long and short-run elasticities of imports with respect to the different components of final expenditure. Final consumption expenditure and investment expenditure are among the major determinants of aggregate import demand in the long run. In the short run, all expenditure components are positively related to import growth, with consumption expenditure having the highest effect on import growth. The findings of the study indicate that the use of aggregate expenditure variable in the import demand function leads to aggregation bias because different components of final expenditure have different import contents. We also show that the relative price formulation is inappropriate in estimating import demand function for Cote d’Ivoire.
Abbott, A. J. and Seddighi, H. R. (1996). Aggregate Imports and Expenditure Components in the U.K.: An Empirical Analysis. Applied Economics, 28(9), 1119–1125.
Arize, A.C., J. Malindretos, and E.C. Grivoyanis (2004). Foreign Exchange Reserves and Import Demand in a Developing Country: The Case of Pakistan. International Economic Journal, 18(2), 259–274.
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.
Bahmani-Oskooee, M. and Niroomand, F. (1998). Long-Run Price Elasticities and the Marshall-Lerner Condition Revisited. Economics Letters, 61(1), 101–109.
Bathalomew, D. (2010). An Econometric Estimation of the Aggregate Import Demand Function for Sierra Leone. Journal of Monetary and Economic Integration, 10(1), 5–24.
Chang, T., Y. Ho, and Huang, C. (2005). A Re-examination of South Korea’s Aggregate Import Demand Function: A Bounds Test Analysis. Journal of Economic Development, 30(1), 119–128.
Chani, M. I., Pervaiz, Z. and Chaudhary, A. R. (2011). Determination of Import Demand in Pakistan: The Role of Expenditure Components. Theoretical and Applied Economics, 8(8), 93–110.
Chantha H., Keo, K. and C. Suttiprapa (2018). An Empirical Analysis of Cambodia’s Import Demand Function. Journal of Management, Economics, and Industrial Organization, 2(1), 1–12.
Chimobi, O. P. and Ogbonna, B. C. (2008). Estimating Aggregate Import Demand Function in Nigeria: A Co-integration Approach. Journal of Research in National Development, 6(1), 170–182.
Deaton, A. and Muellbauer, J. (1980). Economics and Consumer Behaviour. Cambridge: Cambridge University Press.
Doroodian, K., R. K. Koshal, and S. Al-Muhanna (1994). An Examination of the Traditional Aggregate Import Demand Function for Saudi Arabia. Applied Economics, 26, 909–915.
Dutta, D. and N. Ahmed (1999). An Aggregate Import Demand Function for Bangladesh: A Cointegration Analysis Approach. Applied Economics, 31, 465–472.
Dutta, D. and N. Ahmed (2004). An Aggregate Import Demand Function for India: A Cointegration Approach. Applied Economics, 11(10), 607–613.
Faini, R., L. Pritchett, and F. Clavijo (1992). Import Demand in Developing Countries, in Dagenais, M.G., and P.A. Muet, eds., International Trade Modelling, New York: Chapman & Hall, 279–297.
Fosu, O. E. and Magnus, F. J. (2008). Aggregate Import Demand and Expenditure Components in Ghana. Journal of Social Sciences, 4(1), 1–6.
Giovannetti, G. (1989). Aggregate Imports and Expenditure Components in Italy: An Econometric Analysis. Applied Economics, 21(7), 957–971.
Goldstein, M. and M.S. Khan (1985). Income and Price Effects in Foreign Trade, in Jones, R. W., & P. B. Kenen (ed.), Handbook of International Economics, Vol. 2: 1041–1105. New York: Elsevier.
Granger, C. and Newbold, P. (1974). Spurious Regressions in Econometrics. Journal of Econometrics, 2, 111–120.
Ibrahim A. and Ahmed, E. M. (2017). The Determinants of Aggregate Demand Function of Sudan. Business Economics Journal, 8:3, DOI: 10.4172/2151-6219.1000309.
Kwiatkowski, D., Phillips, P. C. B., Schmidt, P. and Shin, Y. (1992). Testing the null Hypothesis of Stationarity against the Alternative of a Unit Root. Journal of Econometrics, 54, 159-178.
Marbuah, G. (2013). Modelling Import Demand Behaviour in Ghana: A Re-examination. Economics Bulletin, 33(1), 482–493.
Min, B. S., Mohammed, H.A. and Tang, T.C. (2002). An Analysis of South Korea’s Import Demand. Journal of Asia Pacific Affairs, 4(1), 1–17.
Modeste, N. C. (2011). An Empirical Analysis of the Demand for Imports in Three CARICOM Member Countries: An Application of the Bounds Test for Cointegration. Review of Black Political Economy, 38, 53–62.
Mohammad, H. A. and Tang, T.C. (2000). Aggregate Imports and Expenditure Components in Malaysia: A Cointegration and Error Correction Analysis. ASEAN Economic Bulletin, 17(3), 257–269.
Mugableh, M. I. (2017). Estimating Elasticity Function of Jordanian Aggregate Import Demand. Applied Economics and Finance, 4(2), 33–37.
Muhammad, S. D. and Zafar, S. (2016). Determinants of Import Demand Functions of Pakistan: An ARDL Bound Testing Approach. International Journal of Business, Economics and Management, 3(9), 113–121.
Murray, T. and Ginman, P. (1976). An Empirical Examination of the Traditional Aggregate Import Model. The Review of Economics and Statistics, 58, 75–80.
Mwega, F. M. (1993). Import Demand Elasticities and Stability during Trade Liberalization: A Case Study of Kenya. Journal of African Economies, 2, 381–416.
Narayan, S. and Narayan, P.K. (2005). An Empirical Analysis of Fiji's Import Demand Function. Journal of Economic Studies, 32(2), 158–168.
N’Guessan, C. Z. S. and Yue, Y. (2010). An Econometric Estimation of Import Demand Function for Cote d’Ivoire. International Journal of Business and Management, 5(2), 77–84.
Nwogwugwu, U. C., Maduka, A. C. and Madichie, C. V. (2015). Price and Income Elasticities of Import Demand in Nigeria: Evidence from the Bound Testing Procedure. International Journal of Development and Economic Sustainability, 3(4), 91–103.
Pesaran H., Shin, Y. and Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16(3), 289-326.
Phillips, P. C. B. and Perron, P. (1988). Testing for a Unit Root in a Time Series Regression. Biometrika, 75(2), 335–346.
Phillips, P.C.B. and Hansen, B. E. (1990). Statistical Inference in Instrumental Variables Regression with I(1) Process. The Review of Economic Studies, 57, 99–125.
Raijal, A., R. K. Koshal and C. Jung (2000). Determinants of Nepalese Imports. Journal of Asian Economics, 11, 347–354.
Sinha, S. (1997). Determinants of Import Demand in Thailand. International Economic Journal, 11(4), 73–83.
Stock, J. and Watson, M. W. (1993). A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems. Econometrica, 61(4), 783–820.
Tang, T. C. and Nair, M. (2002). A Cointegration Analysis of Malaysian Import Demand Function: Reassessment from the Bounds Test. Applied Economics Letters, 9(5), 293–296.
Tang, T. C. (2003). An Empirical Analysis of China's Aggregate Import Demand Function. China Economic Review, 14(2), 142–163.
Tsionas, E. G. and Christopoulos, D. K. (2004). International Evidence on Import Demand. Empirica,31(1), 43–53.
Urbain, J. P. (1993). Exogeneity in Error Correction Models. Springer-Verlag, Berlin Heidelberg, New York.
Xu, X. (2002). The Dynamic-Optimizing Approach to Import Demand: A Structural Model. Economics Letters, 74, 265–270.
Yin, F. and S. Hamori (2011). Estimating the Import Demand Function in the Autoregressive Distributed Lag Framework: The Case of China. Economics Bulletin, 31(2), 1576–1591.
Ziramba, E. (2012). Revisiting the South African Aggregate Import Demand: A View from Expenditure Components. Journal for Studies in Economics and Econometrics, 36(2), 67–83.