Research Discussion Paper – RDP 8910 An Analysis of the Determinants of Imports
December 1989
Abstract
The econometric technique of cointegration is used to model the aggregate demand for imports in Australia over the period from September 1974 to September 1989. We find that movements in total and endogenous imports are well explained by movements in domestic demand, the relative price of imports, the relative price of exports, and the level of overtime. The demand for imports is found to be more responsive to changes in demand than to changes in prices, although movements in prices have an impact on import demand over a longer period of time. Our models explain almost all of the rapid growth of imports over the period from September 1986 to September 1989, and over this period we find that the contribution to growth in imports of relative prices outweighs that of demand.