An Aggregate Import Demand Function For Yemen: An ARDL Bounds Testing Approach

Abstract

#This paper analyses the determinants of aggregate import demand in Yemen. Due to the small size sample of the current study, the use of traditional co- integration techniques may be unreliable. Therefore, the recently developed bounds test for co-integration within ARDL modeling approach is applied to annual data covering the period 1990-2009. It is found that aggregate import demand and its determinants exhibit a long run equilibrium relationship. The long run income and relative prices elasticities are, respectively, 1.75 and -0.98. The ECM representation of the import demand function reveals a little bit higher income and relative prices elasticities and a moderate speed of adjustment to equilibrium.