Some international evidence on the stability of aggregate import demand function

This paper empirically analyses the stability of the aggregate import demand function for G7 countries. The standard cointegration test and a test developed by Gregory and Hansen are performed. The results of standard cointegration tests suggest that there is no stable cointegrating relation between real import, real GDP and relative import price for all G7 countries. The cointegrating relation is empirically supported for France and Germany if structural change for cointegrating vector is explicitly taken into consideration. The cointegrating relation is empirically rejected for Canada, Italy, Japan, the UK and the USA. Thus, the stimulation of domestic business conditions will not necessarily link the quantity of imports for these five countries.