Articles
Import Demand Elasticities of Sri Lanka from January 2010 to March 2021 and the Change in Elasticities during the COVID-19 Pandemic
Authors:
S. M. Medha Kumari,
Central Bank of Sri Lanka (CBSL), LK
About S. M. Medha
Head, International Trade Division, Economic Research Department (ERD)
Janaka Maheepala,
Central Bank of Sri Lanka (CBSL), LK
About Janaka
Head, Modelling and Forecasting Division, Economic Research Department (ERD)
K. R. Dheeshana Koswatte,
Central Bank of Sri Lanka (CBSL), LK
About K. R. Dheeshana
Modelling and Forecasting Division, Economic Research Department (ERD)
Sachira Perera
Central Bank of Sri Lanka (CBSL), LK
About Sachira
Modelling and Forecasting Division, Economic Research Department (ERD)
Abstract
Elasticity of demand for imports of Sri Lanka in the post-Civil War period up to March 2021 and the change in them during the COVID-19 pandemic were estimated. (Relative) price elasticity, (production) activity elasticity and exchange rate elasticity were estimated for aggregate and disaggregated imports using Ordinary Least Squares (OLS) techniques with and without dummies, Autoregressive Distributed Lag (ARDL), and Error Correction Modeling. We found that price elasticity of aggregate import demand is inelastic. With the removal of fuel from aggregate imports, elasticities increase marginally. Activity elasticities of aggregate import demand, non-food consumer goods, intermediate goods and investment goods are inelastic over the short run and elastic over the long run while short run elasticity declined during the pandemic. Demand for food is elastic with respect to relative prices and the exchange rate and price elasticity declined during the pandemic. Intermediate goods are not significantly related to prices and exchange rates but are related to production activity. Our results are important for implementation of monetary, exchange-rate, fiscal, and trade policies of Sri Lanka.
How to Cite:
Kumari, S.M.M., Maheepala, J., Koswatte, K.R.D. and Perera, S., 2020. Import Demand Elasticities of Sri Lanka from January 2010 to March 2021 and the Change in Elasticities during the COVID-19 Pandemic. Staff Studies, 50(2), pp.115–148. DOI: http://doi.org/10.4038/ss.v50i2.4726
Published on
30 Dec 2020.
Peer Reviewed
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