A Reassessment of Long-Run Elasticities of Japanese Import Demand Rumi Masih, Goldman Sachs & Co. Abul M.M. Masih, Edith Cowan University, School of Finance and Business Economics Unlike the findings of Mah (1994) [Mah, J.S. (1994) Japanese Import Demand Behav- iour: The Cointegration Approach. Journal of Policy Modeling 16:291–298] who, based on the Engle–Granger test of cointegration, fails to find evidence of a long-run relationship among variables associated with an import demand function for Japan, in this analysis the Johansen’s MLE multivariate cointegration procedure reveals that such variables seem to be cointegrated, and thus share a long-run equilibrium relationship. Furthermore, the recently prescribed Stock and Watson (1993) Dynamic OLS (DOLS) procedure, which, apart from being superior to a number of alternative estimators, is robust to small sample and simultaneity bias as well as being able to accommodate higher orders of integration, is employed to derive long-run import price and income elasticity estimates. Results reveal that both price and income variables do affect import demand significantly, and more interestingly, contrary to previous findings, play an important role in explaining Japanese import demand, at least over the long run. This finding is quite intuitive in that, although nonmarket forces did play a role in destablilizing Japanese import demand, this was most likely a short-run phenomena. Over the long term, however, such theoretically postulated economic influences outweighed short-run disturbances in achieving an equilibrium rela- tionship. Finally, the innovative analytical techniques used in this study have a far-reaching potential for use in future applied research in a variety of fields.  2000 Society for Policy Modeling. Published by Elsevier Science Inc. Key Words: Import; Elasticities; Long-run; Dynamic. Address correspondence to R. Masih, Goldman Sachs & Co, 85 Broad Street, New York, NY 10004, USA. The authors would especially like to thank Jim Stock, Soren Johansen, Jesus Gonzalo, Katarina Juselius, Adrian Pagan, and Deane Terrell for their very helpful comments and previous discussions. Research assistance from San Jegatheswaran is gratefully acknowl- edged. The second author would like to acknowledge financial support provided through a University of New South Wales Special Research Grant. Authors share equal responsibil- ity to the paper. The usual disclaimer, of course, applies. The views expressed in this manuscript are not necessarily shared by Goldman Sachs & Co. Received March 1997; final draft accepted December 1997. Journal of Policy Modeling 22(5):625–639 (2000)  2000 Society for Policy Modeling 0161-8938/00/$–see front matter Published by Elsevier Science Inc. PII S0161-8938(98)00014-3