A cointegration analysis of Malaysian import demand function: reassessment from the bounds test

Tuck Cheong Tang, Mahendhiran Nair

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    75 Citations (Scopus)

    Abstract

    This paper presents an empirical analysis of the aggregated import demand behaviour for Malaysia. The study involved a small sample of annual data from 1970 to 1998. To estimate the long-term relationship between import demand, and its determinants, namely income and relative prices, a robust estimation method known as the Unrestricted Error Correction Model - Bounds Test Analysis was used. The results show that import volume, income and relative prices are cointegrated. The estimated long-run elasticites of import demand with respect to income and relative prices are 1.5 and -1.3 respectively. This implies that monetary, fiscal and exchange rate policies can be used as instruments to maintain favourable trade balance.

    Original languageEnglish
    Pages (from-to)293-296
    Number of pages4
    JournalApplied Economics Letters
    Volume9
    Issue number5
    DOIs
    Publication statusPublished - 2002

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