The Implications of Trade Policy and 'Natural' Barriers Induced Protection for Aggregate Demand for Imports:Evidence for Malawi

Abstract

This paper analyses the relative importance of trade policy and 'natural' trade barriers in the demand for imports for Malawi, a geographically landlocked sub-Saharan African economy, using an augmented dynamic import demand model. Incidence analysis of protection shows that pre-liberalisation trade policy barriers were greater than 'natural' barriers but in post-liberalisation 'natural' barriers were greater. Econometric analysis of the import demand model shows that 'true' protection of importables has been a decisive disincentive to importing. Therefore, like other landlocked countries Malawi needs to aggressively lower not only trade policy barriers but also 'natural' barriers for greater efficient trade.

After an initial introduction, the structure of the paper is as follows: Trade, Commercial Policy and Trade Regimes and 'Natural' Barriers, The Modelling Framework: The Traditional and Augmented Import Demand Models, 'True' Protection Measurement Under Full and Partial Price Transmission, Empirical Estimation of the Augmented Import Demand Model, ending with Conclusions and Policy Implications.

Citation

The Implications of Trade Policy and ‘Natural’ Barriers Induced Protection for Aggregate Demand for Imports:Evidence for Malawi, Centre for Research in Economic Development and International Trade (CREDIT), University of Nottingham, v + 26 pp.

The Implications of Trade Policy and ‘Natural’ Barriers Induced Protection for Aggregate Demand for Imports:Evidence for Malawi

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