英国进口量及其影响因素assignment范文

发布时间：2016-09-21 07:23

英国进口量及其影响因素assignment范文
Import Volume And Its Determinants For United Kingdom 

国际贸易对发达国家和发展中国家经济的影响，一直是大多数研究人员在国际贸易领域内工作的兴趣和关注的话题。是否贸易关系是稳定的，随着时间的推移或不成为至关重要的，同时试图分析进口量对一个国家的经济的影响。
对于这一点，，我们首先需要研究的假设，即存在一个进口量和其主要决定因素之间的协整关系。协整的证据表明进口需求函数及其决定因素之间的长期关系是稳定的。考虑到长期以及短期调整过程中的进口需求函数的误差修正模型已被使用。

The effect of international trade on the economy of developed as well as developing nations has been a topic of interest and concern to most researchers working within the realm of international trade. The question whether trade relationships are stable over time or not becomes crucial while trying to analyze the effect of volume of import on the economy of a country.
The purpose of this paper is to determine whether there exists a long term relationship between volume of imports and its determinants for United Kingdom from 1970 Quarter1 till 2004 Quarter4. The objective here is to study the price and income effects on volume of imports using the import demand function.
For this we first need to examine the hypothesis that there exists a cointegration between the volume of imports and its major determinants. Evidence of cointegration indicates a stable long term relationship between import demand function and its determinants. To take into account the long term as well as short term adjustment process of the import demand function the Error Correction Model has been used.

According to the import demand function the volume of imports depends upon the amount of economic activity in the country (United Kingdom) and the relative prices of imports to domestic goods. (Dash, 2007) While the quantity of imports is treated as a dependent variable, income and price are treated as independent variables.


A large amount of literature has been written about the aggregate import demand function showing the effect of price of imports and GDP on volume of imports. But the literature varies widely in conclusions. For example, Dutta and Ahmed (1997) paper on the import demand function in Bangladesh shows both price and income elasticities are statistically significant. However, Kalyoncu, Huseyin (2006) in estimating an aggregate import demand fuction for Turkey finds price elasticities of demand for import to be more than the income elasticities. And Sinha (1997) in estimating import demand function of Thailand finds prices to be altogether inelastic and only income to be elastic.

In U.K. volume of imports is a very significant part of the GDP. U.K imports are fourth highest in the world. The financial recession which hit the world in 2007 had a very great impact on the U.K. economy, so much so, that in 2007 U.K. had the highest current account deficit. Keeping these facts in mind I expect to see a fall in the volume of imports of U.K. in their actual value in 2008. However, it is difficult to make any prediction as to what the forecast maybelike.

Majority of the research material for this paper has been gathered from the University of Cambridge library and online journals. The paper is divided into 3 sections: Data and Methodology, Forecasting and Conclusion.

DATA AND METHODOLOGY

The import demand function is given by

Volimp= F ( gdp, impind/ gdpdef)

Volimp is the volume of imports. GDP is the domestic income and impind/ gdpdef gives the relative prices of imports to domestic goods. Here impimd stands for unit value of import prices and gdpdef for the GDP deflator.


The long run import demand function for United Kingdom is as follows:

Lnvolimpt = Î20 + Î21lngdpt + Î22lnprt + ut (1)
lnvolimpt = natural log of volume of import in UK ( measured in ￡ millions chained prices)
lngdpt= natural log of real GDP (measured in ￡ millions chained prices)
lnprt= natural log of (unit value of import prices/ GDP deflator)

ut is the error term which is assumed to be normally distributed. The coefficients estimated from the above equation Î21 (> 0) and Î22 (< 0) are income and price elasticities respectively.

The data used is quarterly and all the variables are in real (not nominal) terms.

To conduct the cointegration test we first carry out unit root tests for all the variables present in equation (1).

On conducting the unit root tests to check for the series to be stationary we find that all three variables at non- stationary in their levels. However, volume of imports, gdp and the relative prices are stationary in their first differences. This means that each of them is an I (1) process with a single unit root.

To check for cointegration the Engle- Granger's Residual based ADF test and the Johansen Cointegration test have been used. First, equation (1) has been estimated using the OLS method. Next it was checked if the residuals are stationary through the ADF test similar to the ones conducted above. The result shows that F statistic is -4.76 which can be rejected at 5% significance level. Thus, the null hypothesis of non- cointegration is rejected. The volume of imports, real GDP, and relative prices are cointegrated that is the disequilibrium error in equation (1) forms a stationary I(0) time series.

To check for multivariate cointegration we use the Johansen Cointegration test. We estimate a VAR equation for all three variables and check for cointegration between volume of imports, prices of imports and GDP. We find a single cointegration vector (result in Appendix). Cointegration among variables implies that the variable cannot move 'too far away' in the long run. That is, the long run relationship is stable.

The final step in the analysis is estimating an error correction model (ECM). As the variables in equation (1) are cointegrated we use anerror correction mechanism which combines both long term equilibrium relationship and short term adjustment dynamics. Through ECM we explain short run discrepancy from long term behaviour in the adjustment process. The model consists of one- period lagged values of logs of volume of imports, price of imports and GDP and difference terms of all three variables with four lagged periods.

The equation for the Error Correction Model is as follows:

†lnvolimpt = α0 + α1aˆ†lngdpt + α2 aˆ†lngdpt-1 + α3 aˆ†lngdpt-2
+ α4ˆ†lngdpt-3 + α5 aˆ†lngdpt-4 + Î20 aˆ†lnprt + Î21 aˆ†lnprt-1 + Î22 aˆ†lnprt-2
+ Î23 ˆ†lnprt-3 + Î24 aˆ†lnprt-4 + Î30 aˆ†lnvolimpt-1 + Î31 aˆ†lnvolimpt-2
+ Î32 ˆ†lnvolimpt-3 + Î33 aˆ†lnvolimpt-4 + Î′lnvolimpt-1 + ηlngdpt-1
+ λlnprt-1 + et (2)

The results of the above regression are in the appendix. For the above equation we conduct the following tests:

ARCH test for homoskedasticity. We find that the F statistic is 0.175 ruling out the possibility of heteroskedasticity.

Breusch- Godfrey serial correlation LM test for serial correlation gives F statistic 0.58. Again we cannot reject the null hypothesis and see that there is no serial correlation.

The error correction model can be modified by eliminating individual variables whose t ratios are insignificant. However, these variables might jointly be significant and to find evidence of this we conduct the Wald test to see that all the coefficients of the variables put together are insignificant. That is in the modified equation there in no difference term of the logs of prices and the one- period lagged value of natural log of prices.

The modified equation is:
ˆ†lnvolimpt = Î20 aˆ†lngdpt + Î21 aˆ†lngdpt-2 + Î22 lnvolimpt-1 + Î23 lngdpt-1

We find that indeed this is the case. The F statistic for the Wald test turns out to be 0.743. The coefficients of all the variables put together are insignificant and so we arrive at equation (3).

For this modified equation we conduct the following tests:
ARCH test for heteroskedasticity yet again does not reject the hypothesis of homoskedasticity. The F statistic is 0.721.
Breusch- Godfrey serial correlation LM test also gives the result of no serial correlation with an F statistic of 0.186.
Ramsey RESET test for detecting misspecification gives a very low F statistic of 0.0403.

Our model does not give misspecification. From the above equation we see that income elasticities are positive( the coefficient on dlngdp is 0.986, on dlngdp(-2) is 0.549 and on lngdp(-1) is 0.512). The coefficient on lnvolimpt-1 that is Î22 (-0.2403) is negative. However, in the long run prices have no effect on the volume of imports.

From the above equation we calculate the adjustment parameter say λ= -Î22 = 0.240372
And the long run elasticity Î′= -Î23 / Î22 = -(0.512069/ -0.240372)= 2.13 (>1). That is highly income elastic.
Since the period taken here is very long we need to check if there was any structural break during this period. We use the chow break point test to determine structural breaks and we find one in the year 1980.
The reason for this structural break is due to U.K. employing a monetarist policy to implemented to curb rise in inflation and public spending starting 1979 under Thatcher government. There was heavy privatisation of nationalised industries and this period saw a very high rate of unemployment. The recession in the early 80's shows up as a structural break for 1970 Q1 to 2004 Q4 period.

FORECASTING
Using the existing dataset from 1970 Q1 to 2004 Q4 we forecast volume of imports for 1970 Q1 to 2008 Q4. For this we expand the existing data set to include values from 2005 Q1 to 2008 Q4 for all variables. Then using the modified ECM we forecast volume of imports and compare it with the actual outcome by plotting the two graphs together below.

The blue line is the actual volume of imports up to 2008 Q4 and the red line is the forecast. As can be seen from the graph forecast shows that the volume of imports falls starting 2007 and is continuing to fall past 2008. In actuality, the volume of imports do fall, but the drop is much sharper than the forecast. The extremely sharp decline in volume of imports of U.K. in 2007 can be attributed to the fact that in that year U.K. had the highest current account deficit in the world.

CONCLUSION 结论
In the year 2007 financial crisis hit the world economy. U.K. was expecting a growth in GDP of 3.1% in 2007 and 2.3% in 2008 (IMF forecast). However, growth in GDP fell by 0.1% in this period. According to the ECM model volume of imports and GDP are directly related. If GDP rises then so do volume of imports and vice- versa. In 2007- 2008 due to fall in GDP volume of imports fell as well. The volume of imports are determined mainly by the GDP and it might take some time before the volume of imports start rising again. This is because U.K. due to its past economic history (recession in early 80s) may take longer to get out of recession in comparison to other European countries. However, the main conclusion of this project is that volume of imports of U.K. are highly income elastic whereas the relative prices of imported goods to domestic goods have no long run impact on them.

References 参考文献

Dash, A.K., (2005), "An Econometric Estimation of Aggregate Import Demand Function of India", Department of Economics, University of Hyderabad, India
Dutta, D., and N. ahmed (1997), "An Aggregate Import Demand Function for Bangladesh :A Cointegration Approach", Applied Economics, 31 (1999): 465-472
Kalyoncu, Huseyin (April 2006), "An aggregate Import Demand Function for Turkey: a cointegration analysis", Munich Personal RePEc Archive
Sinha, D. (1997), "Determinants of import demand in Thailand", International Economic Journal, Volume 11, Number 4, pp. 73- 83.
Tsangyao Chang, Yuan- Hong Ho, Chiung- Ju Huang (June 2005), " A Re-examination of South Korea's Aggregate Import Demand Function: The Bounds test Analysis", Journal of Economic Development, volume30
Tang T.C., and H.A. Mohammad (2000), "An aggregate Import demand fuction for Malaysia: A cointegration and Error Correction Analysis", Utara Management Review, 1, 43-57


Wooldridge, J.M., (2006), Introduction to Econometrics


Thomas, R.L., (1997), Modern Econometrics, An introduction

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