The Aggregate Import Demand Function of Iran: A New Reassessment by Bounds Testing Approach

Most of the available empirical studies about specification of import demand function are concerned with two kinds of specification: traditional and foreign exchange constraint specification. In recent years, with the improvement in new econometrics approaches and considerable progress of co-integration tests for investigating the long-run relationship among understudy variables, most of the empirical studies about import demand function of developing countries have put aside the foreign exchange constraint specification, explored the traditional specification of import demand function and accepted it. This study intends to reassess the existence of a long-run relationship among the constituent variables of the traditional of Iran’s import demand function by applying. a new approach called” Bounds Testing Approach” (Pesaran; shin &smith 2001). The results of this study indicate that the value of demanded import, relative import prices and real domestic income of Iran throughout 1959-2000 are co-integrated. Also the long-run estimated income and price elasticities whit ARDL approach are 1. 595 and -1. 44 respectively.