An Econometric Testing of Traditional Import Demand Function for Cote d’Ivoire

Abstract

This study estimates an aggregate import demand function for Cote d’Ivoire and tests the price homogeneity assumption implied by conventional import models. Estimations are based on annual data for real import, real GDP, domestic and import prices over the period 1980-2017. The empirical results reveal that there exists a long run relationship between imports, income, domestic and import prices. In both the long and short run, imports are positively related to real income and domestic prices, and negatively related to foreign prices. The demand for imports is found to respond much more strongly to changes in domestic price rather than income and import price. The study also shows that the assumption of price homogeneity does not hold, implying that the relative price formulation of import demand function is inappropriate in the case of Cote d’Ivoire.

Keywords: Import Demand, Income, Relative Price, Cote d’Ivoire