How responsive are the sudanese imports to currency Devaluations? evidence from the error-correction model

Abstract EN

This study estimates the responsiveness of import demand to currency devaluation in the Sudan over period 1970-2008.

While the OLS model results show that demand for imports was positively influenced by nominal output and foreign exchange reserves, it was inelastic with respect to these regressors in the long run.

The results of the error-correction model indicate that changes in nominal income, foreign exchange reserves and domestic inflation could positively affect demand for imports in the short run.

In contrast, exchange rate devaluation could negatively affect demand for imports only in the short run.

Additionally, the results show that demand for imports is very elastic with respect to domestic inflation in the short run.

Since demand for imports is found to be inelastic with respect to nominal exchange rate devaluation, exchange rate devaluation policy was not the best policy for rectifying deficits in the country’s current account balance during this period.