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Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports - Sectoral Evidence for Some OECD Destinations

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Author Info

  • Ansgar Belke
  • Matthias Göcke
  • Martin Günther

Abstract

A non-linear model is applied where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction. We call the latter a “play” area – analogous to mechanical play and implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on German exports is then estimated based on quarterly data from 1995Q1 to 2010Q3. For some of the main export partners of Germany outside the euro area and some of the most important tradable sectors we find significant hysteretic effects for a part of the German exports.

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File URL: http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2012-02.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by ROME Network in its series ROME Working Papers with number 201202.

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Length: 32 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:rmn:wpaper:2012102

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Web page: http://www.rome-net.org

Related research

Keywords: Exchange rate movements; play-hysteresis; modelling techniques; switching / spline regression; export demand;

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References

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  1. Kannebley Jr., Sergio, 2008. "Tests for the hysteresis hypothesis in Brazilian industrialized exports: A threshold cointegration analysis," Economic Modelling, Elsevier, vol. 25(2), pages 171-190, March.
  2. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
  3. Cross, Rod, 1994. "The Macroeconomic Consequences of Discontinuous Adjustment: Selective Memory of Non-dominated Extrema," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(2), pages 212-21, May.
  4. Belke, Ansgar & Göcke, Matthias, 2004. "Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?," IZA Discussion Papers 1126, Institute for the Study of Labor (IZA).
  5. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued) 740, Netherlands Central Bank, Research Department.
  6. Parsley, David C & Wei, Shang-Jin, 1993. "Insignificant and Inconsequential Hysteresis: The Case of U.S. Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 606-13, November.
  7. Campa, Jose M., 2000. "Exchange rates and trade: How important is hysteresis in trade?," IESE Research Papers D/427, IESE Business School.
  8. Godart, Olivier N. & Görg, Holger & Görlich, Dennis, 2009. "Back to normal? The future of global production networks after the crisis," Kiel Policy Brief 9, Kiel Institute for the World Economy (IfW).
  9. Julia Darby & Andrew Hughes Hallett & Jonathan Ireland & Laura Piscitelli, . "The Impact of Exchange Rate Uncertainty on the Level of Investment," ICMM Discussion Papers 49, Department of Economics University of Strathclyde.
  10. 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.
  11. Kerstin Stahn, 2007. "Has the Export Pricing Behaviour of German Enterprises Changed? Empirical Evidence from German Sectoral Export Prices," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 227(3), pages 295-329, June.
  12. Richard Baldwin, 1989. "Sunk-Cost Hysteresis," NBER Working Papers 2911, National Bureau of Economic Research, Inc.
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Cited by:
  1. Verheyen, Florian, 2013. "Exchange rate nonlinearities in EMU exports to the US," Economic Modelling, Elsevier, vol. 32(C), pages 66-76.
  2. Belke, Ansgar & Oeking, Anne & Setzer, Ralph, 2014. "Exports and Capacity Constraints: A smooth transition regression model for six euro-area countries," CEPS Papers 9228, Centre for European Policy Studies.
  3. Göcke, Matthias, 2013. "Play-Hysteresis in Supply as Part of a Market Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79695, Verein für Socialpolitik / German Economic Association.
  4. Ansgar Belke, 2014. "Exit Strategies and Their Impact on the Euro Area - A Model Based View," Ruhr Economic Papers 0467, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Göcke, Matthias, 2012. "Play-hysteresis in supply as part of a market model," Discussion Papers 61, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
  6. Ansgar Belke & Anne Oeking & Ralph Setzer, 2013. "Exports and Capacity Constraints – A Smooth Transition Regression Model for Six Euro Area Countries," ROME Working Papers 201313, ROME Network.

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