A REASSESSMENT OF AGGREGATE IMPORT DEMAND FUNCTION IN THE ASEAN-5: A Cointegration Analysis |
| |
Authors: | Tuck Cheong Tang |
| |
Institution: | Monash University, Petaling Jaya, Malaysia |
| |
Abstract: | This study aims to reinvestigate the empirical evidence on the long-run relationship of aggregate import demand behavior for the ASEAN-5 founding nations. This study adopts the import demand equation that has been developed by Xu (2002). The results of bounds test (Pesaran et al., 2001) show the volume of imports, activity variable (national cash flow), and relative price of imports are cointegrated in Malaysia and Singapore. However, no empirical evidence supports that these variables are cointegrated in Indonesia, Thailand, and the Philippines. This study provides a relevant implication specifically that devaluation strengthens the balance of trade. Following the Marshall-Lerner condition, exchange rate policies such as devaluation, can used to improve trade balance in Malaysia, Singapore, the Philippines, and Thailand, but not in Indonesia. |
| |
Keywords: | Developing countries insurance premiums international trade pooled mean group estimator |
|
|