Intertemporal Substitution in Import Demand and Habit Formation

David de la Croix and Jean-Pierre Urbain

No 1996002, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: To study non-durable import demand, we extend previous work done by Clarida (1994) and Ceglowski (1991) by considering a two-good version of the life cycle model in which we introduce time-nonseparability in the households' preferences. The model is estimated using quarterly data for US and France. Using the information contained in the observed stochastic and deterministic trends, we derive a cointegration restriction used to estimate curvature parameters of the instantaneous utility function. The remaining parameters are estimated in a second step by GMM. The constancy of the different parameters is investigated, both in the long and the short-run. Habit formation turns out to be an important factor of import demand.

Keywords: Imports; Habit formation; Inter-temporal Substitution; cointegration; GMM (search for similar items in EconPapers)
JEL-codes: D12 F41 (search for similar items in EconPapers)
Pages: 22
Date: 1996-01-01
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Citations: View citations in EconPapers (5)

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Journal Article: Intertemporal substitution in import demand and habit formation (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1996002

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