2.5.3

1. 2.5.3 Per Capita Merchandise Import (PCIM) (a) For model specifications in options (Models) I, II and III, Per Capita Merchan- dise Imports a function of world market prices (Y10), (E), and the instrumental variables PCOP and Y6(11). For Model III, only the world market price and Y6 are set to be the independent and/or instrumental variables. Coefficient estimates generated for these relations by the 2SLS are summarized below: PCIM (Kgs. per capita) (b) As in the case with PCDP, a dominant causal factor in the configuration of merchandise imports is the per capita kilogram requirement. Model III has a coefficient estimate for this factor of 6.99. Apparently, kilogram requirements are highly elastic with respect to merchandise imports. The interpretation of this finding is that merchandise imports provide a great proportion of the total kilogram requirement of cereals in the Somali setting. Specifically, a single kilogram increase in the requirement tends to raise the merchandise imports by nearly 6.99 kilograms per capita. The relationship between these factors, hence, is positive and highly significant. (c) With respect to import price, the coefficient estimate bears a negative sign. Import elasticity is large and decisive in all model specifications. Any increase in the import price of cereals would tend to lower quantities imported by Somalia at any given time. The implication is wide and clear in that, given declining trends in domestic cereal production followed as the case often is by increasing tendencies to resort to imports in order to bridge the cereal gap, tremendously large foreign exchange bills will have to be paid to meet these import requirements. (d) Merchandise imports are relatively elastic with respect to the domestic ratio of prices (E). Any incremental change in this ratio would tend to lower imports even though at a smaller magnitude often less than one kilogram per capita at any given time. (e) Relationships between merchandise imports (PCIM) and domestic produc- tion (PCDP) are polar. Improvements in the domestic per capita cereal production 15