South Africa’s Import Demand Function with China: A Cointegration Approach

The International Journal of Business and Finance Research, v. 9 (3) p. 33-44, 2015

12 Pages Posted: 8 Feb 2016

See all articles by Russell E Triplett

Russell E Triplett

University of North Florida - Dept. of Economics

Ranjini L. Thaver

Stetson University

Date Written: 2015

Abstract

During the past decade China has emerged as South Africa’s largest trade partner. In an effort to understand this important and remarkable trend, we estimate South Africa’s import demand function with China over the period 1993-2012. Specifying an error-correction model, we use the bounds testing approach of Pesaran, Shin and Smith (2001) and find evidence of long-run cointegration among the variables. Our long-run elasticity estimates suggest that income is the most important factor in the determination of South Africa’s imports from China. Interestingly, the effect of the real relative price is positive, but this counterintuitive result is consistent with evidence from other middle-income countries. These combined factors imply that the South African trade deficit with China will continue to widen despite a real depreciation of the rand.

Keywords: South Africa, China, Bilateral Trade, Elasticities, Cointegration

JEL Classification: F10, F14

Suggested Citation

Triplett, Russell E and Thaver, Ranjini L., South Africa’s Import Demand Function with China: A Cointegration Approach (2015). The International Journal of Business and Finance Research, v. 9 (3) p. 33-44, 2015, Available at SSRN: https://ssrn.com/abstract=2655022

Russell E Triplett (Contact Author)

University of North Florida - Dept. of Economics ( email )

4567 Johns Bluff Road, South
Jacksonville, FL 32224-2675
United States

Ranjini L. Thaver

Stetson University ( email )

421 N Woodland Blvd
Deland, FL 32724
United States
386.822.7573 (Phone)
386.822.7569 (Fax)

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