Modelling the Determinants of Import Demand in Sub-Sahara Africa

Abstract

This study employed panel data from 1995 to 2012 to model the determinants of imports in sub-Sahara Africa. Also, it assesses the long-run and short-run elasticities of aggregate imports and their components and considers the impact of trade liberalization. Fixed effects and Random effect estimation were done for the model. The results indicate that domestic income, foreign exchange reserves and trade liberalization all play significant roles both in the short-run and long-run import demand levels in sub-Sahara Africa. Therefore, trade policy authorities who aim at reducing imports to correct balance-of-payments imbalances in the long run should focus their efforts on policies that will reduce purchasing power at the macroeconomic level and implement policies that will ensure an increased domestic supply.