Hysteresis in Exports
AbstractThis paper presents an empirical examination of the importance of hysteresis in international trade. An econometric model of export determination is developed where the presence of sunk costs causes discontinuous behaviour and hysteresis so that an individual exporter’s decision to stay in or out of the market depends on the current value of the exchange rate as well as its past history. The aggregate level of exports is then determined by the proportion of exporters that stay in the market. The resulting non-linear model is estimated using data on manufacturing exports for Germany, Japan and the United States. The paper finds strong evidence in favour of the presence of pricing-to-market and hysteresis only in the case of Japanese exports.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1352.
Date of creation: Feb 1996
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- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- F31 - International Economics - - International Finance - - - Foreign Exchange
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