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Abstract                 Volume:4  Issue-5  Year-2016          Original Research Articles


Online ISSN : 2347 - 3215
Issues : 12 per year
Publisher : Excellent Publishers
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A Reexamination of COMESA’s Aggregate Import Demand Function: Multivariate Cointegration Approach
Clive Mairura1, Mark Korir2 and T. Anthoney Swamy3*
1Department  of  Agricultural  Economics  and  Agribusiness  Management,  Faculty  of Agriculture, Kisii University, P.O Box 408-40200, Kisii, Kenya.
2Department of Economics, School of Business and Economics, MoiUniversity, P.O Box 3900-30100, Eldoret, Kenya.
3Department of Chemistry, School of Science and Technology, University of Eastern Africa, Baraton, P.O. Box 2500, Eldoret, Kenya.
*Corresponding author
Abstract:

This study reexamines the behaviour of aggregate import demand function for COMESA using the Johansen Juselius multivariate cointegration approach and error correction mechanism on the annual data for the period 1970 to 2006. Empirical evidence show that aggregate imports, gross domestic product, unit value of imports, prices of domestically produced goods, foreign exchange reserves and the dummy variable to capture the effect of import liberalization  are cointegrated. There is a long run equilibrium relationship among variables and the stability tests indicate that the aggregate import demand function remains stable over the sample period and the estimated results are appropriate for policy implication. The estimation  of  an  error  correction mechanism  enables  the separation of the short-run and long-run  elements  of  this  relationship. Results show that aggregate import demand is largely explained by real GDP, foreign exchange   reserves, prices of domestically produced goods but less sensitive to import prices.

Keywords: Aggregate Import Demand,Multivariate Cointegration,Error Correction Mechanism, COMESA.
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How to cite this article:

Clive Mairura, Mark Korir and T. Anthoney Swamy. 2016.  A Reexamination of COMESA’s Aggregate Import Demand Function: Multivariate Cointegration ApproachInt.J.Curr.Res.Aca.Rev. 4(5): 66-83
doi: http://dx.doi.org/10.20546/ijcrar.2016.405.008