Structural change in import demand behavior: The Korean experience

Abstract

In the area of international trade, there have been a number of studies designed to explain the determinants of import demand. Some studies such as Bahmani-Oskooee (1986) and Tegene (1989) have already looked into this issue in developing countries. However, previous studies dealing with the developing economies have ignored examining the structural stability of import demand. Since major import liberalization measures started in the early 198Os, Korean import demand behavior is a candidate for investigation of the question of structural stability. The purposes of the present article are, first, to provide estimates of import demand functions for Korea from quarterly data by the appropriate lag length selection method; second, to check the stability of coefficients by a structural break analysis; third, to match the econometric evidence with the actual change in import policy in Korea; and, finally, to perform some diagnostic tests. The plan of the article is the following. In Section 2, we report the results of our estimating equations for Korean imports. Section 3 contains the evidence of structural change and policy-related discussion. Conclusions are given in Section 4.