AGGREGATE IMPORT DEMAND FUNCTION FOR EIGHTEEN OIC COUNTRIES: A COINTEGRATION ANALYSIS

Tang Tuck Cheong

doi:10.31436/ijema.v11i2.92

Authors

Tang Tuck Cheong School of Business and Information Technology, Monash University Malaysia, 2 Jalan Kolej, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan, Malaysia (e-mail: tang.tuck.cheong @busit.monash.edu.my).

DOI:

https://doi.org/10.31436/ijema.v11i2.92

Abstract

This is an empirical investigation on the long-run relation of the aggregate import demand function for Organization of Islamic Conferences (OIC) economies, using the recently developed import demand equation that is derived from the dynamic-optimizing intertemporal approach (Xu, 2002). We include only 18 of the 27 OIC founding countries for analysis due to data unavailability for a sufficient sample span. The results of the bounds test (Pesaran, Shin and Smith, 2001) indicate that the volume of import demanded, domestic real activity, and relative prices for 10 of the 18 sample countries are cointegrated. Overall, the estimated price and domestic activity variables are inelastic in the long-run. Some policy implications on trade balance have been drawn in this study.

JEL classification: C51, F14

Key words: Bounds testing approach; Import demand function; Organization of Islamic Conferences