A demand equation for West Malaysian imports

Abstract

This paper reports an econometric study of a import function for West Malaysia using time-series data for the period 1960-1974. The theoretical basis of the investigation is a postulated behavioural relationship between the quantity of imports of goods and services and several explanatory variables namely relative prices, lagged imports and gross national product. The results from the most preferred regression equation show that the coefficients for the relative price variable and income variable (represented by gross national product) are significant at the one percent level. However the coefficient for lagged imports is insignificant. Its insignificance is due to the problem of multicollinearity. Finally, the income elasticity of demand for imports is found to be approximately 0.7 implying that import demand is income inelastic. The price elasticity of demand for imports is found to be approximately 0.8.