Persistent Trade Effects of Large Exchange Rate Shocks
This paper presents a theoretical basis for the argument that large exchange rate shocks--such as the 1980s dollar cycle--may have persistent effects on trade flows and the equilibrium exchange rate itself. The authors begin with a partial-equilibrium model in which large exchange rate fluctuations lead to entry or exit decisions that are not reversed when the currency returns to its previous level. They then develop a simple model of the feedback from hysteresis in trade to the exchange rate itself. Here they see that a large capital inflow, which leads to an initial appreciation, can result in a persistent reduction in the exchange rate consistent with trade balance. Copyright 1989, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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.
Volume (Year): 104 (1989)
Issue (Month): 4 (November)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/ |
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00335533|
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.:
- Baldwin, Richard, 1990. "Hysteresis in Trade," Empirical Economics, Springer, vol. 15(2), pages 127-42.
When requesting a correction, please mention this item's handle: RePEc:tpr:qjecon:v:104:y:1989:i:4:p:635-54. 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: (Karie Kirkpatrick)
If references are entirely missing, you can add them using this form.