Aggregate import demand function for slovakia: Evidence from ardl bounds testing approach

Abstract

This paper estimates the aggregate import demand function for Slovakia, using recent cointegration approach, the ARDL bounds testing approach, for the quarterly period of 1993:1-2003:3. The results show that real import, relative price and real GDP are cointegrated. The CUSUM and CUSUMSQ stability tests indicate that there exists a stable import demand function. The results imply that price stabilization policies may not be used as instruments to maintain a favorable trade balance for Slovakia. Therefore, for a sustainable trade balance, the development of local industries should be encouraged in order to have less import.