Modelling Fiji’s disaggregated import demand: a commodity-stratified elasticity mapping approach

This paper re-estimates both the aggregated and disaggregated import demand functions for the Fijian economy. We consider nine groups of goods for the disaggregated imports based on the Standard International Trade Classification (SITC). The empirical evidence from both the dynamic ordinary least squares and autoregressive distributed lag regressions estimations suggests that higher domestic income leads to greater import demand. Second, aligning with prior studies, we obtain negative and an inelastic coefficient for the relative price variable, suggesting that while higher import prices marginally reduce demand, Fijians continue to import as domestic substitutes remain limited. Third, results reveal that exchange rate volatility is not a significant determinant of import demand, implying that Fiji’s imports remain largely unaffected by short-term exchange rate movements. Fourth, remittance inflows positively and significantly influence most import categories, highlighting their role in boosting household purchasing power and import demand. Fifth, foreign reserves exhibit a significant positive impact on majority of the import groups, reflecting their role in sustaining Fiji’s import capacity. Sixth, we observe that external shocks, including oil price surges, the COVID-19 crisis, and natural calamities significantly dampen import demand. Finally, our results indicate that there is no aggregation bias for import demand in Fiji.