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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 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 playhysteresis 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.

Suggested Citation

  • 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.
    • Handle: RePEc:diw:diwwpp:dp1203
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    References listed on IDEAS

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    More about this item

    Keywords

    exchange rate movements; play-hysteresis; modelling techniques; switching/spline regression; export demand;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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