Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis

A structural import demand equation is derived and estimated for a large number of countries, using recent time-series techniques that address the problem of nonstationarity. The average price elasticity is close to zero in the short run but is slightly higher than one in the long run. A similar pattern holds for income elasticities: the short-run income elasticities are on average less than 0.5, while the long-run income elasticities are close to 1.5. The paper also analyses the small-sample properties of both the ordinary-least-squares (OLS) and the fully modified (FM) estimators of the short- and long-run elasticities, using Monte Carlo methods.