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Some Empirical Evidence on Hysteresis in Aggregate US Import Prices

  • Richard Baldwin

This paper empirically investigates the hypothesis that hysteresis has occurred in US aggregate non-oil import prices. We find strong evidence that a shift has occurred in the exchange rate pass-through relationship in the 1980~~ and that the nature of the shift is consistent with the hysteresis hypothesis. Results on two specific structural models of this phenomenon (the beachhead model and the bottleneck model) are less conclusive. The data broadly support both models, but neither by itself can provide a convincing accounting of all the evidence.

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File URL: http://www.nber.org/papers/w2483.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2483.

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Date of creation: Jan 1988
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Publication status: published as Baldwin, Richard E. "Hysteresis In Import Prices: The Beachhead Effect," American Economic Review, 1988, v78(4), 773-785.
Handle: RePEc:nbr:nberwo:2483
Note: ITI IFM
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  1. Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
  2. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-85, September.
  3. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  4. Feinberg, Robert M, 1989. "The Effects of Foreign Exchange Movements on U.S. Domestic Prices," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 505-11, August.
  5. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
  6. Baldwin, Richard, 1990. "Hysteresis in Trade," Empirical Economics, Springer, vol. 15(2), pages 127-42.
  7. Charles Bean, 1988. "Sterling Misalignment and British Trade Performance," NBER Chapters, in: Misalignment of Exchange Rates: Effects on Trade and Industry, pages 39-76 National Bureau of Economic Research, Inc.
  8. 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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