Estimating income and price elasticities of imports for Fiji in a cointegration framework

Paresh Kumar Narayan, Seema Narayan

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169 Citations (Scopus)

Abstract

This paper estimates an import demand model for Fiji using the recently developed bounds testing approach to cointegration for the period 1972 to 1999. To estimate the long-run elasticities, we use three approaches: the autoregressive distributed lag (ARDL) model, the dynamic ordinary least squares (DOLS) approach and the fully modified ordinary least squares technique. Our results indicate a long-run cointegration relationship among the variables when import volume is the dependent variable. We find that the coefficient on income is elastic while the coefficient on relative prices (import price relative to domestic price) is unitary elastic in the long run. The error correction mechanism reveals that after any shock(s) to the determinants of import demand equilibrium is attained after 2 1/2 years.

Original languageEnglish
Pages (from-to)423-438
Number of pages16
JournalEconomic Modelling
Volume22
Issue number3
DOIs
Publication statusPublished - May 2005
Externally publishedYes

Keywords

  • Cointegration
  • Fiji
  • Import demand

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