What determines import demand in Zimbabwe? Evidence from a gravity model

The notion of the determinants of import demand has become a major policy issue in most countries due to the persistent trade deficits being experienced and their effects on the economy. Against this backdrop, this study empirically examined the factors determining import demand in Zimbabwe using a gravity model. Forty trading partners for Zimbabwe and data for the period 2004 to 2017 were employed. The model was estimated using Ordinary Least Squares (OLS) with and without fixed effects and the findings were that gross domestic product and trade openness for Zimbabwe and her trading partners had a positive impact on import demand. Furthermore, inflation and population for Zimbabwe as well as its trading partners' and bilateral distance were found to be negatively related to import demand. More so, the study found out that dollarization has managed to increase import demand. Based on these findings, policies directed at reducing import demand should target trade openness, population and inflation level. The findings also imply that de-dollarization is an effective strategy to reduce import demand.