Aggregate import demand function for Pakistan: a co-integration approach

This paper examines the determinants of aggregate import demand for Pakistan for the period 1972-1999. The Johansen (1988) co-integration analysis is used for establishing a long run relationship between real imports and its determinants namely real GDP, relative prices and exchange rate volatility. The error correction model is used to capture possible short run disequilbrium. This study provides evidence of a unique long run import demand function. This is further supported by analyzing impulse response function and variance decomposition.