Changes in the Income and Price Elasticities of U.S. Import Demand

Previous research on the estimation of income and price elasticities of U.S. import demand has indicated that these elasticities may have changed over time. To examine this issue, alternative specifications of the U.S. imporr demand function for the total time series and the fixed and flexible exchange rate periods are considered. It was found that the U.S. import demand function was not homogeneous in the fixed exchange rate period and homogeneous in the flexible exchange rate period. Recursive regression estimates of the income elasticity indicate that it has risen aver time. The price elasticities are shown tn be quite volatile in the 1970s, but more stable during the 1980s. These results imply that researchers estimating import demand elasticities may need to he cautious about the specification when the time series encompasses a change in the exchange rate regime.