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Corresponding Author:
Nomfundo P. Vacu, Department of Economics, University of South Africa, Pretoria, South Africa

Corresponding Coauthors:
Nicholas M. Odhiambo, Department of Economics, University of South Africa, Pretoria, South Africa

The Determinants of Import Demand in South Africa: An Empirical Investigation

(pp. 51-76)
JEL classification: F1
Keywords: ARDL Approach, Import Demand, South Africa

Abstract

This study uses the autoregressive distributed-lag (ARDL) estimation approach to investigate the key drivers of import demand in South Africa for the period 1985 to 2015. Unlike other previous studies, the study estimates four models: aggregate import demand, import demand for consumer goods, import demand for intermediate goods, and import demand for capital goods. The overall results show that aggregate import demand is positively determined by investment spending, consumer spending and relative import price, but negatively determined by government spending, both in the short run and in the long run. Other results show that: 1) foreign exchange reserves have a negative long-run impact on import demand; 2) trade liberalisation policy has a positive impact on aggregate import demand in the long run and a negative impact in the short run; and 3) exports of goods and services in the previous period have a positive short-run impact on import demand. In terms of consumer goods, import demand is positively determined by trade liberalisation policy in the long run, but only positively and negatively determined by foreign exchange reserves and trade liberalisation policy in the short run, respectively. In terms of intermediate goods, import demand is found to be positively determined by government spending, consumer spending and trade liberalisation policy, but negatively determined by relative import price, both in the short run and long run. In terms of capital goods, import demand is found to be negatively determined by foreign exchange reserves, both in the short and long run; while relative import price and exports of goods and services are found to have a long-run and short-run positive impact, respectively.

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