Foreign Exchange Constraints and Imports in Developing Countries

Abstract

This paper estimates a disequilibrium model of developing country imports that incorporates determinants of private sector import demand as well as the foreign exchange rationing of the authorities. The parameters of the model are estimated using a full information maximum likelihood estimator, and the model provides an estimate of the probability of import rationing for each observation in the sample. Estimation results conform with the notion that there was regime switching, that is, periods of both import rationing and nonrationing were observed for the developing countries included in the study.