Irish aggregate import demand equation - optimal functional form

Abstract

A more general approach than that of `best fit? for choosing empirically the appropriate formulation of the aggregate import demand function for Ireland is presented. This approach leads to the choice of a particular form, from a class of forms, for a given specification of the aggregate import demand function. It is found that the log linear form is preferred to the linear form where gross national income and the domestic to foreign price ratio are the explanatory variables. It is also found that the inclusion of a partial adjustment mechanism does not significantly improve the model specification.