AN ECONOMIC ANALYSIS OF THE DETERMINANTS OF DOMESTIC DEMAND FOR TEA IMPORTS IN IRAQ USING THE AUTOREGRESSIVE DISTRIBUTED LAG TECHNIQUE (ARDL) FOR THE PERIOD (1990-2020)

Zuhal R Kadhim

doi:10.36103/ijas.v53i1.1524

Abstract

This study was aimed to estimate the domestic demand function on tea imports in Iraq using the Autoregressive Distributed Lag model (ARDL) for co-integration during the period 1990-2020.The data are verified for stationary by using unit root tests basis on Augmented Dickey - Fuller Test. The existence of a long-run equilibrium relationship among tea import quantity, current prices of tea and coffee buying, gross national income, and number of buyers is proved using bounds test method to co-integration. Results of estimating short and long-run models of the demand of tea imports by using the unrestricted error correction approach showed that the error correction parameter is adjusted annually by 140%. Results of estimating price elasticity of demand in the short run showed that the absolute coefficient of price elasticity of demand is less than one and more than zero, which means that tea is a necessary commodity for the Iraqi shopper. Additionally the cross elasticity coefficient had a positive sign in the short and long run, which means that coffee, is an alternative good for tea from the viewpoint of the Iraqi consumer. With regarding to the coefficient value of the income elasticity of demand, it was positive and less than one in the short and long run, which means that tea, is a necessary normal commodity for Iraqi buyers. The study recommended that it is necessary to diversify the sources of national income in the local economy by utilizing all available resources in order to reduce dependence on oil revenues, which were a major source of financing imports in the country.

Highlights

Studies of import demand have gained special position during the past fifty years, as this is due to the importance of defining the policies that must be followed to face the balance of payments problems that most countries of the world are witnessing
Tea production has set new records since 2004, as studies dealt with by the World Food and Agriculture Organization (FAO) resulting from the meeting of government groups concerned with tea, confirmed that global tea production has continued to rise until it reached 5.5 million tons in 2017
China is at the top of the largest countries in production of tea, followed by India, Kenya, Sri Lanka, Turkey, Indonesia, Vietnam, Japan, Iran, and Argentina, while Turks are the world's most consuming people of tea (7)

Summary

INTRODUCTION

Studies of import demand have gained special position during the past fifty years, as this is due to the importance of defining the policies that must be followed to face the balance of payments problems that most countries of the world are witnessing. Study data In order to achieve the objectives of the research in practice, the study relied on annual secondary data for the period 1990-2020, for each of the total quantities of imported tea, gross national income, rates of tea and coffee purchase prices on level of Iraq (in the current local currency) and the number of buyers represented by the population as a factor affecting the domestic total demand These data were obtained from their various local and international sources, which included the Iraqi Ministry of Planning, the Iraqi Ministry of Trade, and the World Food and Agriculture Organization (FAO).

Integration with with without with with without

Log likelihood

Long Run Coefficients

Estimated Value

Findings

Income Elasticity of Demand