A test for strong hysteresis in international trade
AbstractThe article suggests a new test for strong hysteresis in international trade. The variables that capture the effects of hysteresis are based on the model of Dixit (1989) with calibrations using a state-space model to determine the parameters for each point in time. These variables are then applied to a cointegration test with breaks, where it is possible to verify whether the hysteresis effect is essential in determining the long-term equilibrium.
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Bibliographic InfoPaper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 195.
Date of creation: 26 Aug 2009
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-03 (All new papers)
- NEP-ECM-2009-10-03 (Econometrics)
- NEP-INT-2009-10-03 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Baldwin, 1989. "Sunk-Cost Hysteresis," NBER Working Papers 2911, National Bureau of Economic Research, Inc.
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