Determinants of imports demand in Zambia

Abstract

This study utilizes an error correction model to examine the determination of aggregate imports and components in Zambia between 1965 and 1997. The estimation results indicate that, in the short-run, (lagged) foreign exchange receipts, international reserves, real income and previous imports all significantly determined the behaviour of aggregate imports over the reference period. Findings also show that aggregate imports were not significantly responsive to relative import prices. The non-significance of the relative price elasticity suggests that trade policies that concentrated overly on expenditure switching such as tariff and non-tariff restrictions or devaluations did not, over the study period, effectively assist trade policy reform efforts. On the other hand, the significance of the foreign exchange receipts, international reserves and real income elasticities suggest that policies which directly enhance foreign exchange availability and promote stabilization are likely to have a greater impact on import volumes than policies that only act on the aggregate demand for imports. Thus, policy-makers aiming to significantly influence imports demand would do so more effectively through the latter policies .