Open AccessBank Credit and Aggregate Import Demand in South Africa: An Autoregressive Distributed Lag Approach
Author(s) -
Emmanuel Ziramba,
Johanna Mumangeni
Publication year - 2017
Publication title -
european scientific journal
Language(s) - English
Resource type - Journals
eISSN - 1857-7881
pISSN - 1857-7431
DOI - 10.19044/esj.2017.v13n16p71
Subject(s) - distributed lag , cointegration , economics , autoregressive model , econometrics , lag , aggregate (composite) , short run , monetary economics , aggregate demand , variable (mathematics) , macroeconomics , monetary policy , mathematics , computer network , mathematical analysis , materials science , computer science , composite material
This study reformulated the aggregate import demand function for South Africa by incorporating a financial variable, bank credit. The study used the bounds testing approach for cointegration and the autoregressive distributed lag models to estimate short-run and long-run elasticities of aggregate import demand. The cointegration results confirm a long run relationship between the quantity of imports and the explanatory variables. Although bank credit has a positive impact on aggregate imports, it is statistically insignificant. It is statistically significant in the short-run. Our results suggest that bank credit is insufficient as a policy instrument for longterm import demand in South Africa. It can only be useful in managing the South African external balance in the short-run.