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 behavior and hysteresis so that individual exporters’ 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 the United States, Germany, and Japan. The paper finds strong evidence in favor of the presence of pricing-to-market and hysteresis only in the case of Japanese exports.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 95/52.
Date of creation: 01 May 1995
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Other versions of this item:
- Giovannetti, Giorgia & Samiei, Hossein, 1996. "Hysteresis in Exports," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1352, C.E.P.R. Discussion Papers.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- F31 - International Economics - - International Finance - - - Foreign Exchange
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