Theoretical and Applied Economics
No. 8 / 2011 (561)
Determination of Import Demand in Pakistan: The Role of Expenditure Components
National College of Business Administration and Economics, Lahore, Pakistan
Zahid PERVAIZ
National College of Business Administration and Economics, Lahore, Pakistan
Amatul R. CHAUDHARY
National College of Business Administration and Economics, Lahore, Pakistan
Abstract. The paper uses imperfect substitution approach to derive the aggregate import demand function on the basis of disaggregated expenditure components. This derived import demand function is then empirically tested for Pakistan by using co-integration and error correction mechanism. The empirical results show that elasticity of import demand with respect to different macro components of final expenditure is different. The import demand in Pakistan is affected positively and significantly by all expenditure components. The relative prices have negative but insignificant relationship with import demand in Pakistan. The findings indicate that use of aggregate expenditure variable in the aggregate import demand function leads to aggregation bias because different macro components of final expenditure have different import contents. The model derived in this study provides indepth guidelines for macroeconomic policy decisions in order to overcome the problem of persistent trade deficit in the country.
Contents
Empirical Study on the Financial Reporting of Intangible Assets by Romanian Companies
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Optimality of Fiscal Policy in Romania in Terms of Laffer Curve
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Work: Social Status and the Role of Work along History – Since Ancient Times to Modern Times
Determination of Import Demand in Pakistan: The Role of Expenditure Components
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The Decision to Invest and Economic Growth. Romania’s Case
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