Import Demand in Three CARICOM Member Countries

OBJECTIVES: This study has two basic objectives. The first is to provide new estimates of the income and price elasticities of import demand for Jamaica (JA), Guyana (GY), and Trinidad and Tobago (TT) using the bounds test for cointegration. The second is to provide estimates of the consumption, investment, and export elasticities of import demand for the three CARICOM member countries using the bounds test for cointegration. These elasticities will be estimated for the period 1970-2006.

DATA/METHODS: The data for this study will be taken from various sources including the International Monetary Fund, the Inter-American Development Bank, UNCTAD, the Bank of Guyana, and the United Nations Statistics Division. The data will be used to estimate two models: a traditional model of import demand and a disaggregated expenditure model of import demand. In analyzing these models, there will be a focus on: (1) determining if there is a cointegrating relationship among the variables in the two models; and (b) estimating the long-run and short-run elasticities for the variables in the two models.

RESULTS/EXPECTED RESULTS: Preliminary results indicate that the variables in the two import demand models are cointegrated. In addition, the results show that in the long-run and short-run the demand for imports is positively and significantly impacted by increases in income, consumption, investment, and exports. The relative price variable is also correctly signed and statistically significant in all of the regressions.