#SINUTRAIN IMPORT GUD ARCHIVE SERIES#

Is the consumer’s subjective discount rate The intertemporal decision of the representative agent from the foreign country is formalized by the following optimization problem: Another assumption involved is that the import decisions are made by an infinitely long lived agent who decides how much to consume from his domestic good ( ) and of the imported good ( ), which is identical to the export demand of the home country ( ). This idea has been developed further for the import model developed under this paper. Then exporter’s demand function will be the same as the importer’s demand function. Assume the number of trading partners of the exporting country (home country) is limited only to one country (foreign country). This paper employs the a methodology of Senhadhi and Montenegro (1999), a slightly different approach but yet based on imperfect substitutes model.

For the multivariate case, the Johansen’s (1988, 1997) cointegration approach is used. In such a scenario (which we recognize with our data), the empirical literature recommends the use of estimators such as the Dynamic OLS (Phillips and Hansen (1990), Phillips and Loretan (1991), Saikkonen (1991)) or the Fully Modified Least Squares (FMLS) (Phillips and Hansen (1990), Hansen (1992).

#SINUTRAIN IMPORT GUD ARCHIVE SERIES#

This has made the identification of the features of time series data an important element in the analysis. The presence of unit roots may seriously bias OLS estimator despite its BLUE characteristics and lead to spurious regression. In 1990s, the studies of Rose (1991), Senhadji and Montenegro (1998, 1999), and Reinhart (1995) have shown that the imports, exports and their relative prices are all unit root processes. Later works more focused on testing and incorporating the inherent non-stationarity feature into the time series model. Furthermore, in their later works, these and other authors also made proposals of the use autoregregressive distrubutive lag models to account for autocorrelations and moving average features in the times series under consideration that might bias OLS estimations. Their proposition was to use simultaneous equation models to avoid endogeneity biases. Endogeneity problems were addressed following decades by authors such as Goldstein and Khan (1978) and Marquez and McNeilly (1988).

However, that the estimation results could be biased due to endogeneity problems caused by the simultaneity of the import and export quantities together with their prices was pointed out in 1950s (Orcutt (1950), Harberger (1953)). From the outset of empirical investigation the works on international trade flows were concentrated more on the significance and consistency of price and elasticity coefficients using OLS methods. The utility optimization subject to the agents’ flow budget constraints yields representations of both import and export demand equations which can be specified as Marshallian demand functions.Įmpirical literature on trade flow relationship has a long and vast history. Agents derive their utility in each period by Cobb-Douglas utility function. Besides, it is also assumed that, both import and export products are consumed by the representative agents together with domestic products. Imperfect substitutability also found its empirical confirmation in later works of Ogaki, Ostry and Reinhart (1994). The estimated parameter lied between 1.0–1.5 in all the regions under study implying their gross substitutability. Ostry and Reinhart (1992) conducted a study in which the intra-temporal elasticity of substitution between traded and non-traded goods was estimated for a broad number of developing countries. This assumption is quite realistic and has found extensive empirical support. they do not render a perfect substitutability between each other in consumption.

The central assumption of the model is that the traded products between importer country and exporter country are not completely homogenous e.g. The imports of a country are a function of import prices, exchange rates and the country’s income and general price level while theexports are a function of export prices, exchange rates as well as incomes and price levels of the country’s trading partners. We used this approach because the model is simple and also summarizes all the main determinants of trade flows between nations. The empirical specification of export and demand functions in this paper basically relies upon the imperfect substitutes model summarized by Goldstein and Khan (1985). Key words: export, import, exchange rates, demand, supply, economic models This article presents export and import functions based on the imperfect substitutes model summarized by Goldstein and Khan (1985).

Sinutrain import gud archive