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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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  • Ansgar Belke

    ()

  • Matthias Göcke
  • Martin Guenther

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 fi nd significant hysteretic effects for a part of the German exports.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0327.

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Length: 29 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:rwi:repape:0327

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

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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. Darby, Julia & Hughes Hallett, Andrew & Ireland, Jonathan & Piscitelli, Laura, 1998. "The Impact of Exchange Rate Uncertainty on the Level of Investment," CEPR Discussion Papers 1896, C.E.P.R. Discussion Papers.
  3. 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.
  4. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued) 740, Netherlands Central Bank, Research Department.
  5. Campa, José Manuel, 2000. "Exchange Rates and Trade: How Important is Hysteresis in Trade?," CEPR Discussion Papers 2606, C.E.P.R. Discussion Papers.
  6. Richard Baldwin, 1989. "Sunk-Cost Hysteresis," NBER Working Papers 2911, National Bureau of Economic Research, Inc.
  7. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
  8. Ansgar Belke & Matthias Göcke, 2005. "Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 185-203, 05.
  9. Godart, Olivier N. & Görg, Holger & Görlich, Dennis, 2009. "Back to normal? The future of global production networks after the crisis," Open Access publications from Kiel Institute for the World Economy 9, Kiel Institute for the World Economy.
  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.
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