Time-series estimation of import demand functions for pulses in India

Abstract

Purpose - This study seeks to examine empirically import demand for total pulses, chickpeas and lentils in India based on the concept of unit root and cointegration. Design/methodology/approach - The Stock-Watson dynamic OLS (DOLS) model - which is robust to small sample and eliminates simultaneity bias - is used to derive the long-run price, income and urbanisation elasticities of import demand. The data covers the period 1970-2000. Findings - Results indicate that real GDP, relative price and urbanisation are the key determinants of import demand for pulses in India. The estimated long-run elasticities of import demand with respect to income (relative price) are 0.4 (-1.7) for chickpeas, 0.56 (-0.87) for lentils and 0.36 (0.00) for total pulses. The estimated long-run elasticities of import demand with respect to urbanisation are 9.9 for chickpeas, zero for lentils and 7.2 for total pulses. The policy implications of the results are discussed. Originality/value - Provides evidence that the response of import demand for pulses to key determinants differ substantially from product to product