Determinants of European Community imports of steel mill products

An attempt is made to measure the magnitude of the elasticity of European import demand for steel products. First, 4 important demand models for iron and steel products in the recent literature are reviewed: one for the European Economic Community (EEC) and 3 for the US. Then, an import demand function is developed and estimated for iron and steel products from third-party countries to the EEC as a whole. The alternative model is distinguished from the preceding models by its dynamic specification. Despite the fact that use of highly aggregated data was necessitated, the results appear satisfactory, especially when compared to those developed by Frieden, which are the only ones available for the EEC. The result that the absolute value of price elasticity of import demand is higher in the short run than in the long run can be attributed to speculative inventory building when an initial increase either in the price level or the level of economic activity enhances expectations of further price rises.