Import Demand Elasticities for South Africa: A Cointegration Analysis

This study acknowledges the lack of foreign exchange as the main obstacle to faster economic growth in South Africa. It is noted that many studies have only focused on exports and export expansion alone as a means to eradicate this economic dilemma. This study considers the import component of the balance of payments, because together with exports the demand for imports clearly determines the behavior of the current account of the balance of payments as a whole. The focus of this paper is on the estimation and interpretation of results of the aggregate and disaggregated import demand elasticities for South Africa. The import demand model is estimated by a means of cointegration analysis. The major finding is that the import elasticity with respect to income is highly significant than the price elasticity of demand for imports. Given this result, concluding remarks highlight some critical policy implications and areas for further research.