The functional form of the aggregate import demand equation: A comparison of three European economies

Abstract

A more general approach than that of ‘best fit’ for choosing empirically the appropriate formulation of the aggregate import demand function for three small open European economies is presented. This approach leads to the choice of a particular form, from a class of forms, for a given specification of the aggregate import demand function. It was found that the log-linear form was preferred to the linear form. This is regarded as an interesting result, given it's economic implications for the type of economy studied in this paper, as it confirms earlier results by Khan and Ross for three different types of economy — the United States, Canada, and Japan.