Exchange rate nonlinearities in EMU exports to the US
This paper investigates the determinants of bilateral exports to the US for twelve EMU countries. Although export demand functions have been studied for at least seventy years of time, the issue of nonlinearity in export demand equations has been benignantly neglected in time series econometrics so far. Accordingly, this paper fills this gap and figures out if exports react to exchange rate changes in a nonlinear fashion. To tackle this issue, we apply the newly developed nonlinear ARDL bounds testing approach of Shin et al. (2011) and find that disregarding nonlinearities might be too restrictive. Our evidence points to the fact that exports react differently to appreciations and depreciations. More precisely, it seems as if exports respond stronger to depreciations than to appreciations. Evidence in favor of hysteresis is less robust.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- B Bhaskara Rao & Rup Singh, 2005.
"Estimating Export Equations,"
- Baldwin, Richard, 1990. "Hysteresis in Trade," Empirical Economics, Springer, vol. 15(2), pages 127-142.
- Olivier J. Blanchard, 1986.
"Hysteresis and Unemployment,"
430, Massachusetts Institute of Technology (MIT), Department of Economics.
- Balke, Nathan S & Fomby, Thomas B, 1997.
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-645, August.
- Tom Doan, "undated". "RATS programs to replicate Balke-Fomby threshold cointegration," Statistical Software Components RTZ00010, Boston College Department of Economics.
- Balke, Nathan S. & Fomby, Thomas B., 1992. "Threshold cointegration," Working Papers 9209, Federal Reserve Bank of Dallas.
- Verheyen, Florian, 2011. "Bilateral exports from Euro Zone countries to the US: Does exchange rate variability play a role?," Center for European, Governance and Economic Development Research Discussion Papers 121, University of Goettingen, Department of Economics.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Mohsen Bahmani-Oskooee, 2007. "Exchange rate volatility and trade flows: a review article," Journal of Economic Studies, Emerald Group Publishing, vol. 34(3), pages 211-255, August.
- Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 437-492.
- 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.
- Belke, Ansgar & Goecke, Matthias & Guenther, Martin, 2012.
"Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports – Sectoral Evidence for Some OECD Destinations,"
Ruhr Economic Papers
327, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Ansgar Belke & Matthias Göcke & Martin Günther, 2013. "Exchange Rate Bands Of Inaction And Play-Hysteresis In German Exports—Sectoral Evidence For Some Oecd Destinations," Metroeconomica, Wiley Blackwell, vol. 64(1), pages 152-179, 02.
- Ansgar Belke & Matthias Göcke & Martin Günther, 2012. "Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports - Sectoral Evidence for Some OECD Destinations," ROME Working Papers 201202, ROME Network.
- Ansgar Belke & Matthias Göcke & Martin Günther, 2012. "Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports: Sectoral Evidence for Some OECD Destinations," Discussion Papers of DIW Berlin 1203, DIW Berlin, German Institute for Economic Research.
- Rudiger Dornbusch, 1985.
"Exchange Rates and Prices,"
NBER Working Papers
1769, National Bureau of Economic Research, Inc.
- Belke, Ansgar & Goecke, Matthias & Guenther, Martin, 2009.
"When Does It Hurt? The Exchange Rate ""Pain Threshold"" for German Exports,"
Ruhr Economic Papers
148, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Ansgar Belke & Matthias Göcke & Martin Günther, 2009. "When Does It Hurt?: The Exchange Rate "Pain Threshold" for German Exports," Discussion Papers of DIW Berlin 943, DIW Berlin, German Institute for Economic Research.
- 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).
- I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued) 740, Netherlands Central Bank, Research Department.
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis and the European Unemployment Problem,"
in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90
National Bureau of Economic Research, Inc.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
- Verheyen, Florian, 2012. "Bilateral exports from euro zone countries to the US — Does exchange rate variability play a role?," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 97-108.
- Campa, Jose Manuel, 2004.
"Exchange rates and trade: How important is hysteresis in trade?,"
European Economic Review,
Elsevier, vol. 48(3), pages 527-548, June.
- Campa, José Manuel, 2000. "Exchange Rates and Trade: How Important is Hysteresis in Trade?," CEPR Discussion Papers 2606, C.E.P.R. Discussion Papers.
- Campa, Jose M., 2000. "Exchange rates and trade: How important is hysteresis in trade?," IESE Research Papers D/427, IESE Business School.
- Thomas Klitgaard, 1999. "Exchange rates and profit margins: the case of Japanese exporters," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 41-54.
- Belke, Ansgar H. & 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).
- 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.
- Hossain, Akhand Akhtar, 2009. "Structural change in the export demand function for Indonesia: Estimation, analysis and policy implications," Journal of Policy Modeling, Elsevier, vol. 31(2), pages 260-271.
- Saten Kumar, 2011. "Estimating export demand equations in selected Asian countries," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 4(1), pages 5-16, February.
- Bruno Coric & Geoff Pugh, 2010. "The effects of exchange rate variability on international trade: a meta-regression analysis," Applied Economics, Taylor & Francis Journals, vol. 42(20), pages 2631-2644.
- Matthieu Bussiere, 2013.
"Exchange Rate Pass-through to Trade Prices: The Role of Nonlinearities and Asymmetries,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 75(5), pages 731-758, October.
- Bussière, Matthieu, 2007. "Exchange rate pass-through to trade prices: the role of non-linearities and asymmetries," Working Paper Series 0822, European Central Bank.
- Kevin B. Grier & Aaron D. Smallwood, 2007. "Uncertainty and Export Performance: Evidence from 18 Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 965-979, 06.
- Katrakilidis, Constantinos & Trachanas, Emmanouil, 2012. "What drives housing price dynamics in Greece: New evidence from asymmetric ARDL cointegration," Economic Modelling, Elsevier, vol. 29(4), pages 1064-1069.
- Mohsen Bahmani-Oskooee & Orhan Kara, 2003. "Relative Responsiveness of Trade Flows to a Change in Prices and Exchange Rate," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(3), pages 293-308.
- Viet Hoang Nguyen & Yongcheol Shin, 2011. "Asymmetric Price Impacts of Order Flow on Exchange Rate Dynamics," Melbourne Institute Working Paper Series wp2011n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:66-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.