Export and Import Price Elasticity for Uganda: An Empirical Analysis
This paper applies Autoregressive Distributed Lag (ARDL) technique to estimate export supply and import demand elasticities for Uganda. Both aggregate and commodity specific elasticities are estimated with six export commodities and fifteen import commodities. To obtain commodity specific elasticities, ARDL models for each commodity are estimated separately using quarterly data for the period 2006-2018. Results suggest that Uganda’s export supply does not respond to changes in relative price (both in the short run and long run) but rather to other factors such as capital formation and expected profit margins. However, considerable variations across commodities and time duration (short run and long run) have been observed. For instance, export for maize is found to have elastic supply (both short run and long run) while sim-sim is found to have inelastic supply in the long run. Regarding imports, our analysis shows that the long run price elasticity of demand is close to unitary while import demand is none responsive to price changes in the short run. Cereals, iron and steel, diary produce, and glass and glassware have fairly elastic demand in the long run and inelastic demand in the short run. The other commodities have inelastic demand in the short run and long run. The none-responsiveness of export supply to changes in relative price suggests presences of supply side constraints which have be addressed. In addition the variation in commodity specific import demand elasticities suggest that trade policies need to be selectively implemented.