Hysteresis in Exports

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Hysteresis in Exports

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Giovannetti, Giorgia
Samiei, Hossein

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Abstract

This 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1352.

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Date of creation: Feb 1996
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Handle: RePEc:cpr:ceprdp:1352

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Paper
- Giorgia Giovannetti & Hossein Samiei, 1995. "Hysteresis in Exports," IMF Working Papers 95/52, International Monetary Fund.

Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
F31 - International Economics - - International Finance - - - Foreign Exchange

Cited by:
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Wendy Carlin & Andrew Glyn & John Van Reenen, 1999. "Export Market Performance of OECD countries: an empirical examination of the role of cost competitiveness," IFS Working Papers W99/22, Institute for Fiscal Studies. [Downloadable!]
Other versions:
- Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, vol. 111(468), pages 128-62, January. [Downloadable!] (restricted)
Keld Laursen & Valentina Meliciani, 2000. "The importance of technology-based intersectoral linkages for market share dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(4), pages 702-723, December. [Downloadable!] (restricted)
Other versions:
- Keld Laursen & Valentina Meliciani, 1999. "The Importance of Technology Based Inter-sectoral Linkages for Market Share Dynamics," DRUID Working Papers 99-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
Emilia Penkova, 2005. "Pricing-to-market or hysteresis?: an empirical investigation of German exports," Discussion Papers in Economics 05_03, University of Dortmund, Department of Economics. [Downloadable!]
bruno amable & jerome henry & frederic lordon & richard topol, 2005. "Complex Remanence vs. Simple Persistence: Are Hysteresis and Unit-Root Processes observationally equivalent?," Computational Economics 0501001, EconWPA. [Downloadable!]

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