Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka

Owing to the unavailability of time-series data on the domestic market-clearing price of imports, the estimation of notional price and income elasticities of aggregate import demand remains a daunting task for a large number of developing countries. This paper develops a structural econometric model...

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Main Authors:	Emran, M. Shahe, Shilpi, Forhad
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Model Construction and Estimation C510 Country and Industry Studies of Trade F140 International Linkages to Development Role of International Organizations O190
Online Access:	http://hdl.handle.net/10986/5691

id	okr-10986-5691
recordtype	oai_dc
spelling	okr-10986-56912021-04-23T14:02:23Z Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka Emran, M. Shahe Shilpi, Forhad Model Construction and Estimation C510 Country and Industry Studies of Trade F140 International Linkages to Development Role of International Organizations O190 Owing to the unavailability of time-series data on the domestic market-clearing price of imports, the estimation of notional price and income elasticities of aggregate import demand remains a daunting task for a large number of developing countries. This paper develops a structural econometric model of a two-goods representative agent economy that incorporates a binding foreign exchange constraint at the administered prices of imports. A theoretically consistent parameterization of the "virtual relative price" of imports circumvents the data problem, and thus enables the estimation of income and price responses by cointegration approach. The price and income elasticity estimates for India and Sri Lanka, in contrast to the extant literature, have correct signs, high statistical significance, and plausible magnitudes. 2012-03-30T07:34:03Z 2012-03-30T07:34:03Z 2010 Journal Article Review of International Economics 09657576 http://hdl.handle.net/10986/5691 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article India Sri Lanka
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Model Construction and Estimation C510 Country and Industry Studies of Trade F140 International Linkages to Development Role of International Organizations O190
spellingShingle	Model Construction and Estimation C510 Country and Industry Studies of Trade F140 International Linkages to Development Role of International Organizations O190 Emran, M. Shahe Shilpi, Forhad Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
geographic_facet	India Sri Lanka
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Owing to the unavailability of time-series data on the domestic market-clearing price of imports, the estimation of notional price and income elasticities of aggregate import demand remains a daunting task for a large number of developing countries. This paper develops a structural econometric model of a two-goods representative agent economy that incorporates a binding foreign exchange constraint at the administered prices of imports. A theoretically consistent parameterization of the "virtual relative price" of imports circumvents the data problem, and thus enables the estimation of income and price responses by cointegration approach. The price and income elasticity estimates for India and Sri Lanka, in contrast to the extant literature, have correct signs, high statistical significance, and plausible magnitudes.
format	Journal Article
author	Emran, M. Shahe Shilpi, Forhad
author_facet	Emran, M. Shahe Shilpi, Forhad
author_sort	Emran, M. Shahe
title	Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
title_short	Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
title_full	Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
title_fullStr	Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
title_full_unstemmed	Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka
title_sort	estimating an import demand function in developing countries : a structural econometric approach with applications to india and sri lanka
publishDate	2012
url	http://hdl.handle.net/10986/5691
_version_	1764395969209696256

Estimating an Import Demand Function in Developing Countries : A Structural Econometric Approach with Applications to India and Sri Lanka

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