The asymmetric effect of income on import demand in Greece

Ioanna C. Bardakas ()
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Ioanna C. Bardakas: Bank of Greece

No 159, Working Papers from Bank of Greece

Abstract: This paper presents empirical evidence supporting the argument that a significant asymmetry exists in the income elasticity of Greek imports. Using multivariate cointegration techniques for the estimation of long-run imports we derive short-run error correction equations that separate income elasticities for periods when income is rising and periods when it is falling. The empirical results show that the response of imports to rising income is stronger than the response of imports to falling income. The important policy implication of this asymmetry is that a consecutively positive growth would lead imports to continuously increase causing the current account deficit to persistently widen.

Keywords: Import demand; asymmetric income elasticities; multivariate cointegration; short-run error correction; current account deficit; structural reforms. (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 F14 (search for similar items in EconPapers)
Pages: 20
Date: 2013-05
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Citations: View citations in EconPapers (1)

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