Trade-volume hysteresis: an investigation using aggregate data
Sunk costs of entry create a wedge between the real exchange rate for which a foreign exporter enters the domestic market, and that for which he exits. On the macroeconomic level, heterogeneous cost structures make the number of entry and exit thresholds approach a continuum: any movement of the real exchange rate beyond its historical peak triggers some entry or exit. A sufficiently large appreciation followed by an equivalent depreciation (a 'cycle') could hysteretically affect the trade volume, because some exporters enter and stay. This paper investigates whether trade-volume hysteresis indeed occurs during such cycles, by testing for structural breaks in the constant term and the real exchange rate elasticity of the import volume in a standard import-volume specification. Binomial tests indicate that constant-term breaks have the sign predicted by hysteresis theory significantly more than 50% of the time. Breaks in the real exchange rate elasticity, on the other hand, have the 'reverse' sign in significantly more than half of the cases.
|Date of creation:||Aug 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.dnb.nl/en/
More information through EDIRC
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, 1988.
"Hyteresis in Import Prices: The Beachhead Effect,"
American Economic Review,
American Economic Association, vol. 78(4), pages 773-85, September.
- Baldwin, Richard E. & Lyons, Richard K., 1994.
"Exchange rate hysteresis? Large versus small policy misalignments,"
European Economic Review,
Elsevier, vol. 38(1), pages 1-22, January.
- Baldwin, R.E. & Lyons, R.K., 1991. "Exchange Rate Hysteresis : Large Versus Small Policy Misalignments," Papers fb-28, Columbia - Graduate School of Business.
- Piscitelli, Laura, et al, 2000.
"A Test for Strong Hysteresis,"
Society for Computational Economics, vol. 15(1-2), pages 59-78, April.
- Richard Baldwin & Paul R. Krugman, 1986.
"Persistent Trade Effects of Large Exchage Rate Shocks,"
NBER Working Papers
2017, National Bureau of Economic Research, Inc.
- 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.
- 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 Manuel, 2004. "Exchange rates and trade: How important is hysteresis in trade?," European Economic Review, Elsevier, vol. 48(3), pages 527-548, June.
- Campa, Jose M., 2000. "Exchange rates and trade: How important is hysteresis in trade?," IESE Research Papers D/427, IESE Business School.
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Fiscal Increasing Returns, Hysteresis, Real Wages and Unemployment,"
NBER Working Papers
2034, National Bureau of Economic Research, Inc.
- Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Fiscal increasing returns, hysteresis, real wages and unemployment," European Economic Review, Elsevier, vol. 31(3), pages 543-560, April.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Fiscal Increasing Returns, Hysteresis, Real Wages and Unemployment," Working papers 429, Massachusetts Institute of Technology (MIT), Department of Economics.
- Dionysios Chionis, 2002. "The Hysteretic Effects on the Real Exchange Rates," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(4), pages 451-463.
- Robert A. Blecker, 1992. "Structural Roots of U.S. Trade Problems: Income Elasticities, Secular Trends, and Hysteresis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 14(3), pages 321-346, April.
- 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.
- Susan A. Hickok & Juann H. Hung & Kurt C. Wulfekuhler, 1991. "An expanded, cointegrated model of U.S. trade," Research Paper 9121, Federal Reserve Bank of New York.
- Rod Cross, 2000. "Hysteresis and Emu," Metroeconomica, Wiley Blackwell, vol. 51(4), pages 367-379, November.
- Ljungqvist, Lars, 1994. "Hysteresis in international trade: a general equilibrium analysis," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 387-399, August.
- Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
- Kim, Yoonbai, 1991. "External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 176-81, February.
- Richard Baldwin, 1988. "Some Empirical Evidence on Hysteresis in Aggregate US Import Prices," NBER Working Papers 2483, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:dnb:wormem:740. 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: (Rob Vet)
If references are entirely missing, you can add them using this form.