An Estimation of Import Demand Function for Wheat in Libya(1980-2016) Empirical Study Using Simultaneous Integration with Thresholds (Co-Integration with Regime Shift )

Abstract

This study empirically estimates the critical parameters of import demand determinants on the long run relation between wheat import and the main factors included in this study , which are Gross Domestic Product (GDP) , imported wheat price and real exchange rate for Libyan Dinar. In this study we applied Zivot-Andrews approach for testing the stability of the variables and Gregory-Hansen approach for testing cointegration ,in order to determined the real relation between variables which included in this study we have applied three methods of cointegration tests, which are Fully Modified Ordinary Least Square Method(FMOLS), Canonical Cointegrating Regression Method(CCR) and Dynamic Ordinary Least Square Method(DOLS).The empirical results confirm that, in the long run there are negative and significant relationships between the demand for wheat imports and the real exchange rate of LD, in the same side the domestic price of wheat have also showed negative effect on wheat import demand, where as GDP variable has show no significant effect on wheat import. On the other hand the values of the dummy variable included on the three constructed models have showed the positive effects of oil price increase in year 2007.