INTERTEMPORAL SUBSTITUTION IN IMPORT DEMAND

This paper investigates the role of intertemporal substitution in US import demand using a model of import consumption based on the permanent income hypothesis. Estimation of the model yields an intertemporal elasticity for consumer imports which is close to 0.8, an estimate which may include importers' purchase and inventory responses to the real interest rate. The implied relative price elasticity of import consumption is also estimated to be close to one. These results indicate that consumption imports may respond to changes in their intertemporal price, as well as changes in their price relative to that of domestic substitutes. © 1991.