Import Demand with Rational Expectations: Estimates for Bauxite, Cocoa, Coffee, and Petroleum

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Abstract
We offer a method for establishing the distributed lag structure in import demand models a priori. We consider a firm which imports raw materials in a world of uncertainty. Traditional considerations of adjustment and inventory holding costs lead to a forward looking import decision rule. Linear rational expectations modelling allows us to transform the forward looking rule into a finite distributed lag specification. While the resulting model is similar in form to earlier empirical models, it is not subject to the @'Lucas Critique.@' The model is fitted to U.S. data over the period 1954-1980.

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