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Import demand under a foreign exchange constraint

Abstract: This paper develops a forward-looking model for import demand under a foreign exchange constraint, in which import growth is an increasing function of contemporaneous and expected future export growth. ; Unlike existing models which stress the role of foreign exchange reserves and contemporaneous export earnings for countries that have limited access to foreign borrowing, this one stresses the importance of the expected time path of future export earnings. The implications of the model are tested and confirmed with data from three East Asian developing countries for which relevant time series are available at quarterly intervals.

Keywords: Capital movements; International finance; Imports; Forecasting; Developing countries;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Research Paper

Publication Date: 1998

Number: 9810