A re-assessment of German import demand

Arbeitspapier

Empirical studies analysing German import demand functions traditionally report implausibly high income and relativly low price elasticities. Furthermore, estimation results strongly depend on the observation period. Minor variations in the estimation period typically lead to insignificant price terms often displaying the wrong sign. Based on an extensive econometric analysis, the author shows that these problems are caused by the use of highly aggregated activity variables (GDP or total demand). The problem is easily solved if GDP components, namely exports and investment, are used to model domestic economic activity. We find that imports, exports, investment, and a relative import price form highly stable cointegration relationships. The corresponding activity elasticity is clearly below 1 and the price elasticity is highly significant. Changes in the estimation period neither change the impact nor the significance of the determinants of imports.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IMK Working Paper ; No. 8/2007

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Model Evaluation, Validation, and Selection ; Trade: Forecasting and Simulation
• Subject: German import demand equation ; price elasticity ; income elasticity ; activity elasticity ; aggregation problems ; error correction model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stephan, Sabine
• Event: Veröffentlichung
• (who): Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
• (where): Düsseldorf
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/105892
• URN: urn:nbn:de:101:1-2008081877
• Last update: 10.03.2025, 11:43 AM CET