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Some Empirical Evidence on Hysteresis in Aggregate US Import Prices

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  • Richard Baldwin

Abstract

This paper empirically investigates the hypothesis that hysteresis has occurred in US aggregate non-oil import prices. We find strong evidence that a shift has occurred in the exchange rate pass-through relationship in the 1980~~ and that the nature of the shift is consistent with the hysteresis hypothesis. Results on two specific structural models of this phenomenon (the beachhead model and the bottleneck model) are less conclusive. The data broadly support both models, but neither by itself can provide a convincing accounting of all the evidence.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2483.

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Date of creation: Jan 1988
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Publication status: published as Baldwin, Richard E. "Hysteresis In Import Prices: The Beachhead Effect," American Economic Review, 1988, v78(4), 773-785.
Handle: RePEc:nbr:nberwo:2483

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  1. Charles Bean, 1988. "Sterling Misalignment and British Trade Performance," NBER Chapters, in: Misalignment of Exchange Rates, pages 39-76 National Bureau of Economic Research, Inc.
  2. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc.
  3. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
  4. Schmalensee, Richard., 1980. "Product differentiation advantages of pioneering brands," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Feinberg, Robert M, 1989. "The Effects of Foreign Exchange Movements on U.S. Domestic Prices," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 505-11, August.
  6. Paul R. Krugman & Richard E. Baldwin, 1987. "The Persistence of the U.S. Trade Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 1-56.
  7. Baldwin, Richard, 1990. "Hysteresis in Trade," Empirical Economics, Springer, Springer, vol. 15(2), pages 127-42.
  8. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
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Cited by:
  1. François Lecointe & Philippe Ducos, 1990. "Effets d'hystérésis sur le commerce extérieur américain," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 94(3), pages 79-93.
  2. Belke, Ansgar & Göcke, Matthias & Guenther, Martin, 2009. "When does it hurt? The exchange rate "pain threshold" for German exports," Discussion Papers 45, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
  3. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 740, Netherlands Central Bank, Research Department.
  4. Jacqueline Dwyer & Christopher Kent & Andrew Pease, 1993. "Exchange Rate Pass-through: The Different Responses of Importers and Exporters," RBA Research Discussion Papers, Reserve Bank of Australia rdp9304, Reserve Bank of Australia.
  5. T.N. Srinivasan & Vani Archana, 2010. "India in the Global and Regional Trade: Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export," Working Papers id:2881, eSocialSciences.
  6. Richard C. Marston, 1991. "Pricing to Market in Japanese Manufacturing," NBER Working Papers 2905, National Bureau of Economic Research, Inc.
  7. Ramon Moreno, 1991. "Explaining the U.S. export boom," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Win, pages 39-52.
  8. Carlo Gola, 2000. "Export pricing strategy of Italian firms: from the depreciation of the lira to the euro," LIUC Papers in Economics, Cattaneo University (LIUC) 77, Cattaneo University (LIUC).
  9. Richard Baldwin & Richard K. Lyons, 1988. "The Mutual Amplification Effect of Exchange Rate Volatility and Unresponsive Trade Prices," NBER Working Papers 2677, National Bureau of Economic Research, Inc.
  10. David Ansic & Geoffrey Pugh, . "An experimental test of trade hysteresis: market exit and entry decisions in the presence of sunk costs and exchange rate uncertainty," Working Papers, Staffordshire University, Business School 002, Staffordshire University, Business School.
  11. Patricia S. Pollard & Cletus C. Coughlin, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers, Federal Reserve Bank of St. Louis 2003-029, Federal Reserve Bank of St. Louis.

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