An Aggregate Import Demand Function for Turkey: The Bounds Testing Approach

Nilgün ÇİL YAVUZ, Burak GÜRİŞ

Abstract


This study investigates the aggregate import demand behavior for Turkey using the bounds test procedure by Pesaran et. al. (2001) which is based on the estimate of an Unrestricted Error Correction Model (UECM). This technique generates robust short and long run estimates in small samples, where the integration of the variables are unknown. Using annual data over the period 1982-2002, the results of the bounds test indicate that there is a long run relationship among import demand, real income and relative prices for Turkey. Moreover, the dummy variable employed to investigate the effect of Turkey’s European Customs Union membership on import demand. The results showed the dummy variable is statistically significant and positive. The findings suggest that Customs Union has increased the import demand of Turkey.

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