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

  • Ansgar Belke
  • Matthias Göcke
  • Martin Günther

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.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1203.

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Length: 22 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwwpp:dp1203
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  1. Richard Baldwin, 1989. "Sunk-Cost Hysteresis," NBER Working Papers 2911, National Bureau of Economic Research, Inc.
  2. 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.
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  8. 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.
  9. 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.
  10. 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.
  11. 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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  13. I. Agur, 2003. "Trade-volume hysteresis: an investigation using aggregate data," WO Research Memoranda (discontinued) 740, Netherlands Central Bank, Research Department.
  14. 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 32840, Kiel Institute for the World Economy (IfW).
  15. Godart, Olivier N. & Görg, Holger & Görlich, Dennis, 2009. "Back to normal? The future of global production networks," Open Access Publications from Kiel Institute for the World Economy 32970, Kiel Institute for the World Economy (IfW).
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