The dynamics of the relationship between foreign exchange reserves and import demand function

Figures & data

Figure 1. Oman total imports, total exports, and total hydrocarbon exports 2011–2020.

Figure 2. Oman exports and imports share of GDP 2011–2020.

Figure 3. Oman total imports and final consumption 2011–2020.

Table 1. Statistical description of data

Panel A: Data description
	P	Y	IG	IS	IT	R
Mean	−0.531	9.562	7.878	6.698	8.150	7.264
Median	−0.682	9.646	7.629	6.550	7.923	6.867
Maximum	0.194	10.264	9.488	8.445	9.744	8.802
Minimum	−1.024	8.362	6.422	5.186	6.677	5.520
Standard deviation	0.424	0.500	0.981	1.119	1.012	1.001
Skewness	0.508	−0.542	0.269	0.234	0.257	0.335
Kurtosis	1.679	2.619	1.613	1.576	1.590	1.667
Jarque–Bera normality test	4.628	2.204	3.688	3.743	3.755	3.709
Probability	0.099	0.332	0.158	0.154	0.153	0.157
Observations	40	40	40	40	40	40
Panel B: Ordinary bilateral correlation
	P	Y	IG	IS	IT
Y	0.698
	(0.000)
IG	0.907	0.922
	(0.000)	(0.000)
IS	0.891	0.927	0.989
	(0.000)	(0.000)	(0.000)
IT	0.905	0.925	0.999	0.994
	(0.000)	(0.000)	(0.000)	(0.000)
R	0.902	0.911	0.974	0.967	0.975
	(0.000)	(0.000)	(0.000)	(0.000)	(0.000)

Notes: Y: income (GDP), IG: import of goods, IS: import of services, IT: total imports and R: reserves. The figures in the parenthesis indicate the p-value of t-statistics of bilateral ordinary correlation.

Table 2. The results of ADF unit root test

Variables	Model with constant				Model with constant and trend
	Level		First difference		Level		First difference
	Test statistics	P-Value	Test statistics	P-Value	Test statistics	P-Value	Test statistics	P-Value
IT	−0.663	0.844	−5.382	0.000	−0.663	0.844	−5.382	0.000
IG	−0.905	0.776	−5.456	0.000	−0.905	0.776	−5.456	0.000
IS	0.088	0.961	−5.219	0.000	0.088	0.961	−5.219	0.000
Y	−4.462	0.001	−3.953	0.004	−4.462	0.001	−3.953	0.004
P	−0.265	0.921	−4.841	0.000	−0.265	0.921	−4.841	0.000
R	−1.085	0.712	−5.840	0.000	−1.681	0.741	−5.755	0.000

Notes: IT: total imports, IG: import of goods, IS: import of services, Y: income (GDP), P: prices and R: reserves. The optimal values of lags were selected using SIC criterion.

Table 3. Estimation results of total import model using ARDL methodology

Panel A: F-bond test
Test statistics		Critical values
			Lower Bound I (0)	Higher Bound I (1)
10.14446		10%	2.592	3.454
		5%	3.1	4.088
		1%	4.31	5.544
Panel B: long-run relationship
Variable	Coefficient	Standard Error	t-Statistic	P-value
R	−0.226	0.156	−1.451	0.156
Y	1.372	0.187	7.351	0.000
P	1.549	0.214	7.223	0.000
Intercept	−2.467	0.893	−2.763	0.009
Panel C: Short-run dynamics
Variable	Coefficient	Standard Error	t-Statistic	P-value
$\mathrm{\Delta }P$	0.820	0.133	6.167	0.000
CointEq(−1)*	−0.747	0.099	−7.541	0.000
Panel D: Specification test
R-squared	0.575
Adjusted R-squared 0.563
Breusch–Godfrey Serial Correlation LM Test (P-value of F test statistics)				0.256
Normality test (P-value of Jarque–Bera test statistics)				0.803
Heteroskedasticity test: ARCH (P-value of F test statistics)				0.336
CUMSUM test				Stable
CUMSUM of squares test				Stable

Note: R: reserves, Y: income (GDP) and P: prices.

Table 4. Estimation results of goods import model using ARDL methodology

Panel A: F-bond test
Test statistics		Critical values
			Lower Bound I(0)	Higher Bound I(1)
8.627		10%	2.592	3.454
		5%	3.100	4.088
		1%	4.310	5.544
Panel B: long-run relationship
Variable	Coefficient	Standard Error	t-Statistic	P-value
R	−0.127	0.164	−0.774	0.445
Y	1.303	0.187	6.971	0.000
P	1.330	0.248	5.360	0.000
Intercept	−2.984	1.137	−2.624	0.013
Panel C: Short-run dynamics
Variable	Coefficient	Standard Error	t-Statistic	P-value
$\mathrm{\Delta }Y$	1.749	0.260	6.733	0.000
CointEq(−1)*	−0.664	0.096	−6.955	0.000
Panel D: Specification test
R-squared	0.590
Adjusted R-squared	0.579
Breusch–Godfrey Serial Correlation LM Test (P-value of F test statistics)				0.510
Normality test (P-value of Jarque–Bera test statistics)				0.924
Heteroskedasticity test: ARCH (P-value of F test statistics)				0.261
CUMSUM test				Stable
CUMSUM of squares test				Stable

Note: R: reserves, Y: income (GDP) and P: prices.

Table 5. Estimation results of service import model using ARDL methodology

Panel A: F-bond test
Test statistics		Critical values
			Lower Bound I (0)	Higher Bound I (1)
4.392		10%	2.592	3.454
		5%	3.100	4.088
		1%	4.310	5.544
Panel B: long-run relationship
Variable	Coefficient	Std. Error	t-Statistic	P-value
R	−0.428	0.393	−1.089	0.284
Y	2.278	0.526	4.328	0.000
P	1.409	0.537	2.625	0.013
Intercept	−11.193	3.007	−3.722	0.001
Panel C: Short-run dynamics
Variable	Coefficient	Std. Error	t-Statistic	P-value
∆R	0.011584	0.099243	0.116724	0.9078
CointEq(−1)*	−0.302	0.061	−4.980	0.000
Panel D: Specification test
R-squared	0.416
Adjusted R-squared	0.383
Breusch–Godfrey Serial Correlation LM Test (P-value of F test statistics)				0.407
Normality test (P-value of Jarque–Bera test statistics)				0.358
Heteroskedasticity test: ARCH (P-value of F test statistics)				0.728
CUMSUM test				Stable
CUMSUM of squares test				Stable

Note: R: reserves, Y: income (GDP) and P: prices.

Table A1. List of variable details

Abbreviation	Variable	Unit	Form
Y	GDP at Constant Prices	Billions of Omani Rials	Log
GI	Imports of Goods
SI	Imports of Services
TI	Total Imports
R	CBO Net Foreign Assets
P	Prices (GDP deflator as proxy)	Index

Data availability statement

The data that support the findings of this study are available on request from the data owner—The Central Bank of Oman. The data are not publicly available due to privacy restrictions.