INCOME AND RELATIVE PRICE ELASTICITIES OF TURKISH IMPORT: AN ARDL BOUNDS TESTING APPROACH

Abstract

In this study, total import, intermediate goods (raw material) imports, consumption goods imports, investment (capital) goods import demand functions of Turkey and the long-run and short-run income and relative price elasticities of them were estimated by ARDL and Error Correction Methods (ECM) for the period 2003:01-2017:12. Results of ARDL estimations  show that import volume, real income, relative price and perception of global risk (vix) are cointegrated, all long-run income elasticities are elastic (excluding investment goods import) but short-run are inelastic, price elasticity is highest in consumption goods import in long-run and  investment goods import in short run, importance of the reducing effect of the global risk perception (vix) on the investment goods imports. The distorting effect of economic growth on the foreign trade balance should be considered in the policy design process.