Research Discussion Paper – RDP 9312 A Re-examination of the Determinants of Australia's Imports
December 1993
Abstract
The trend rise in import penetration in Australia has renewed interest in the determinants of import volumes. In this paper, an attempt is made to explain the growth in Australia's imports in terms of the increased openness of the economy. Openness is proxied by the effective rate of protection. It is found that whilst reductions in protection do not help explain the growth in aggregate imports, they do explain a substantial share of the growth in imports of consumption and intermediate goods. This is said to reflect the impact of reductions in protection on both the demand for imports and the domestic supply of import substitutes.