Trade Liberalization and Disaggregated Import Demand in Uganda


Studies investigating determinants of import demand for Uganda present aggregate findings yet there is a need to disaggregate the findings for specific sectors. This creates a research gap on disaggregated findings of import demand. This research attempts to fill this research gap by establishing determinants of import demand using disaggregated sector level data for consumer, intermediate and capital goods. The study estimates the long-run and short-run import demand elasticities for consumer, intermediate and capital goods over the period (1994 to 2012). The results show that there exists a cointegrating relationship between the disaggregated import demand and the following set of variables; relative import price, GDP per capita, real effective exchange rate, foreign exchange rate reserves and trade openness. The long run elasticity appears more responsive to import demand compared to the short-run elasticity. Importantly the effect of a change in trade openness on the volume of imports is positive, suggesting trade liberalization increases import demand.

Share and Cite:

Samuel, G. (2015) Trade Liberalization and Disaggregated Import Demand in Uganda. Modern Economy, 6, 316-337. doi: 10.4236/me.2015.63030.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Jaimovich, D. and Kamuganga, D. (2010) Three Decades of Trade Policy in Uganda: Two Generations of Reforms in the Quest to Become Part of the Global Market. Department of Applied Econometrics and International Economic Policy, Goethe University. c.
[2] Blejer, M. and Cheasty, A., (1990) Fiscal Implications of Trade Liberalization. In: Tanzi, V., Ed., Fiscal Policy in Open Developing Economies, International Monetary Fund, Washington DC.
[3] Khattry, B. and Rao, J.M. (2002) Fiscal Faux Pas? An Analysis of the Revenue Implications of Trade Liberalization. World Development, 30, 1431-1444.
[4] Mwase, N.R.L. (1990) Liberalizing Foreign-Exchange Rates in Sub-Saharan Africa: A Comment. Development Policy Review, 8, 83-86.
[5] Brownbridge, M. and Tumusiime-Mutebile, E. (2006) Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability. Development Policy Review, 25, 193-213.
[6] Kilimani, N. and Sebagala, R, (2009) Trade Liberalization, Export and Import Growth: Evidence from Uganda. CSAE Working Paper.
[7] Omolo, S.W. (1992) Bilateral Trade between Kenya and Uganda: An Empirical Investigation. Master’s Thesis, University of Nairobi, Nairobi.
[8] Abuka, C.A and Ddamulira, D.M. (1999) Import Demand in Uganda: An Investigation, 1987-1996. Bank of Uganda Staff Papers, Vol. 1, No. 1, December 1999.
[9] Grossman, G. M. and Helpman, E. (1991) Trade, Knowledge Spillovers and Growth. European Economic Review, 35, 517-526.
[10] Hong, P. (1999) Import Elasticities Revisited. Discussion Paper No. 10, Department of Economic and Social Affairs, New York.
[11] Goldstein, M. and Khan, M.S. (1985) Income and Price Effects in Foreign Trade. In: Jones, R.W. and Kenen, P.B., Eds., Handbook of International Economics, Elsevier Science Publications, New York, Vol. II, 1041-1105.
[12] Junz, H. and Rhomberg, R.R. (1973) Price Competitiveness in Export Trade among Industrial Countries. American Economic Review, Papers and Proceedings, 63, 412-418.
[13] Tang, T.C. (2003) An Empirical Analysis of China’s Aggregate Import Demand Functions. China Economic Review, 12, 142-163.
[14] Dutta, D. and Nasir Uddin, A. (2004) An Aggregate Import Demand Function for India: A Cointegration Analysis. Applied Economics Letters, 11, 607-613.
[15] Ho, W.S. (2004) Estimating Macao’s Import Demand Functions. Monetary Authority of Macao, 18.
[16] Santos-Paulino, A. and Thirlwall, A.P. (2004) The Impact of Trade Liberalisation on Exports, Imports and the Balance of Payment of Developing Countries. The Economic Journal, 114, F50-F72.
[17] Sarmad, K. (1989) The Determinants of Import Demand in Pakistan. World Development, 17, 1619-1625.
[18] Melo, O. and Vogt, M.G. (1984) Determinants of the Demand for Imports of Venezuela. Journal of Development Economics, 14, 351-358.
[19] Gumede, V. (2000) Import Demand Elasticities for South Africa: A Cointegration Analysis. Journal for Studies in Economics and Econometrics, 24, 21-37.
[20] Aydin, M., Ciplak, U. and Yucel, E. (2004) Export Supply and Import Demand Models for the Turkish Economy. Research Department Working Paper, the Central Bank of the Republic of Turkey, No. 04/09, 107-123.
[21] Clarida, R.H. (1994) Cointegration, Aggregate Consumption, and the Demand for Imports: A Structural Econometric Investigation. The American Economic Review, 84, 298-308.
[22] Senhadji, A. (1998) Time-Series Estimation of Structural Import Demand Equations: A Cross-Country Analysis. IMF Staff Papers, 45, 236-268.
[23] Dash, A.K. (2006) An Econometric Estimation of the Aggregate Import Demand Function for India. The ICFAI Journal of Applied Finance, 12, 30-40.
[24] Zaramba, E. (2010) Price and Income Elasticities of Crude Oil Import Demand in South Africa: A Cointegration Analysis. Energy Policy, 38, 7844-7849.
[25] Mwega, F.M. (1993) Import Demand Elasticities and Stability during Trade Liberalization: A Case Study of Kenya. Journal of African Economies, 2, 381-416.
[26] Giovanetti, G. (1989) Aggregate Imports and Expenditure Components in Italy: An Econometric Analysis. Applied Economics, 21, 957-971.
[27] Aizenman, J. and Jinjarak, Y. (2009) Globalisation and Developing Countries—A Shrinking Tax Base? Journal of Development Studies, 45, 653-671.
[28] Baunsgaard, T. and Keen, M. (2009) Tax Revenue and (or?) Trade Liberalization. IMF Working Paper 2005-112. Journal of Public Economics, 94, 563-577.
[29] Ebrill, L., Stotsky, J. and Gropp, R. (1999) Revenue Implication of Trade Liberalization. IMF Occasional Paper No. 180.
[30] Phillips, E.C.B. and Perron, P. (1988) Testing for a Unit Root in Time Series Regression. Biometrika, 75, 335-346.
[31] Dickey, D.A. and Fuller, W.A. (1981) Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49, 1057-1072.
[32] Asteriou, D. (2006) Applied Econometrics: A Modern Approach Using Eviews and Microfit. Palgrave Macmillan, Basingstoke.
[33] Engle, R.F. and Granger, C.W.J. (1987) Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55, 251-276.
[34] Harvey, S. and Sedegah, K. (2011) Import Demand in Ghana: Structure, Behaviour and Stability. AERC Research Paper No. 233.
[35] Frimpong, J.M. and Oteng-Abayie, E.F. (2006) Aggregate Import Demand and Expenditure Components in Ghana: An Econometric Analysis. MPRA Paper, No. 599.
[36] Cheung, Y.-W. and Lai, K.S. (1993) A Fractional Cointegration Analysis of Purchasing Power Parity. Journal of Business and Economic Statistics, 11, 103-112.

Copyright © 2022 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.