LONG-RUN RELATIONSHIP BETWEEN IMPORTS AND EXPORTS: EVIDENCE FROM ASIAN COUNTRIES

We used Engle-Granger cointegration test to investigate and compare the long-run performance of imports and exports in Pakistan, India, Sri Lanka, Korea and Thailand. Graphical analysis demonstrates an inherent tendency of imports and exports to move together in the long run. Cointegration and error correction results support the graphical analysis that these countries do not violate on the average the international budget constraint, and trade disequilibrium is a short-run phenomenon that is sustainable in the long run. Macroeconomic policies in the sample countries have been adequately effective to affect long-run equilibrium between imports and exports. The international events had differential impact on each country of our sample.