Foreign Trade Regimes and Import Demand Function: Evidence from Sri Lanka
27 Pages Posted: 9 May 2002
Date Written: October 2001
Abstract
Time series data for Sri Lanka span periods of pervasive trade and exchange restrictions along with periods of liberalized trade. This paper implements a structural econometric model of aggregate imports which incorporates the implications of the shifts in the policy regime. The results demonstrate that the model outperforms the existing alternatives both on statistical and economic grounds. The estimated elasticities, in contrast to the available evidence, have correct signs, high statistical significance, and plausible magnitudes. The implications for policy analysis like calculation of equilibrium exchange rate are discussed.
Keywords: Import Demand, Trade Policy, Sri Lanka, Cointegration, Intertemporal Substitution
JEL Classification: F14, F31, O16, C51
Suggested Citation: Suggested Citation
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