A Co-integration Analysis of the Dominican Republic’s Aggregate Import Demand Function under a Floating Exchange Rate Regime
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 2
Abstract
This paper presents an empirical examination of the responsiveness of aggregate imports to variations in relative prices and domestic economic activity in the Dominican Republic under a floating exchange rate regime implemented in 1985. Using the „bounds‟ testing approach to co-integration of Pesaran et al. (2001) and a method developed by Bårdsen (1989) to derive long-run price and income elasticities of import demand for the period of 1985-2005, the findings show the existence of a co-integration relationship between imports, relative prices and domestic income. Total imports have a long-run price demand elasticity of -1.61, indicating that relative prices have a strong effect on their demand and thus signifying that the demand for imports is strongly affected by domestic inflationary pressures. Moreover, the long-run domestic income demand elasticity is +1.24, demonstrating that imports are strongly affected by domestic economic activity. This latter result is shown to have important implications for sustainable economic growth in the Dominican Republic, particularly in the light of its recent membership in the Central American Free Trade Agreement (DR-CAFTA).
Authors and Affiliations
Santiago Grullón| NYC & Company and Adjunct Professor, Mercy College
Keywords
Related Articles
- EP ID EP1770
- DOI -
- Views 524
- Downloads 33
STOCK LIQUIDITY DETERMINATION EVIDENCE FROM AMMAN STOCK EXCHANGE
This study aims to investigate and examine the factors affecting stocks liquidity by using data of 100 share holding companies that represent Amman Stock Exchange (ASE) index in the recent period from 2011 to 2013. The r...
UNDERSTANDING DIAMOND PRICING USING UNCONDITIONAL QUANTILE REGRESSIONS
This paper investigates the relationship between the selling price of diamonds and their weight in carats. For this purpose, we use a unique sample of 112,080 certified diamonds collected from www.info-diamond.com during...
CAUSALITY ANALYSIS OF VOLATILITY IN EXCHANGE RATE AND STOCK MARKET PRICES: A CASE STUDY OF PAKISTAN
This study attempted to investigate the direction of causation between the volatilities of exchange rate and stock market prices in Pakistan. Monthly time series data of Karachi Stock Exchange prices (KSE-100 Index) and...
ESTIMATION OF URBAN-RURAL EXPENDITURE AND HOUSEHOLD SIZE ELASTICITIES OF FOOD ITEMS IN PAKISTAN:- EVIDENCE FROM PSLM SURVEY
This study evaluates the household food demand patterns among different income sorts in urban and rural areas of Pakistan and estimation of food expenditure and household size elasticities. The different income sorts are...
AN ANALYSIS OF INTEREST AND EXCHANGE RATES EFFECT ON THE NIGERIAN ECONOMY: 1975 – 2008
The study examines the impact of interest and exchange rates on the Nigerian economy from 1975-2008. Data for the variables were collected from the CBN statistical bulletin. The study employs the ordinary least square (O...