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Some Empirical Evidence on Hysteresis in Aggregate US Import Prices

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  • Richard Baldwin

Abstract

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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  • Richard Baldwin, 1988. "Some Empirical Evidence on Hysteresis in Aggregate US Import Prices," NBER Working Papers 2483, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2483
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    1. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
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    9. 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.
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    Cited by:

    1. Richard Baldwin & Richard K. Lyons, 1988. "The Mutual Amplification Effect of Exchange Rate Volatility and Unresponsive Trade Prices," NBER Working Papers 2677, National Bureau of Economic Research, Inc.
    2. Cheung, Yin-Wong & Sengupta, Rajeswari, 2013. "Impact of exchange rate movements on exports: An analysis of Indian non-financial sector firms," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 231-245.
    3. Jacqueline Dwyer & Christopher Kent & Andrew Pease, 1994. "Exchange Rate Pass‐Through: Testing the Small Country Assumption for Australia," The Economic Record, The Economic Society of Australia, vol. 70(211), pages 408-423, December.
    4. Catherine L. Mann, 1991. "Structural Change And Prospects For Sustained Improvement In U.S. External Balance," Contemporary Economic Policy, Western Economic Association International, vol. 9(2), pages 50-58, April.
    5. George Alessandria & Horag Choi, 2019. "Entry, Trade, and Exporting over the Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(S1), pages 83-126, December.
    6. Manitra Rakotoarisoa, 2007. "Explaining Durations in Country Investment Ratings: A Competing Risk Model with Random-Effects," EcoMod2007 23900074, EcoMod.
    7. Kim J. Ruhl & Jonathan L. Willis, 2017. "New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 703-726, August.
    8. Richard C. Marston, 1989. "Pricing to Market in Japanese Manufacturing," NBER Working Papers 2905, National Bureau of Economic Research, Inc.
    9. Jacqueline Dwyer & Christopher Kent & Andrew Pease, 1993. "Exchange Rate Pass-through: The Different Responses of Importers and Exporters," RBA Research Discussion Papers rdp9304, Reserve Bank of Australia.
    10. David Ansic & Geoffrey Pugh, 1999. "An experimental test of trade hysteresis: market exit and entry decisions in the presence of sunk costs and exchange rate uncertainty," Applied Economics, Taylor & Francis Journals, vol. 31(4), pages 427-436.
    11. Ramon Moreno, 1991. "Explaining the U.S. export boom," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 39-52.
    12. Carter Mix, 2023. "The Dynamic Effects Of Multilateral Trade Policy With Export Churning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 653-689, May.
    13. T.N. Srinivasan & Vani Archana, 2009. "India in the Global and Regional Trade - Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export," Trade Working Papers 22261, East Asian Bureau of Economic Research.
    14. Aziz, Nusrate & Ahmad, Ahmad Hassan, 2018. "Exchange rate hysteresis in the UK imports from the South Asian Countries," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 159-178.
    15. T.N. Srinivasan & Vani Archana, 2010. "India in the Global and Regional Trade: Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export," Working Papers id:2881, eSocialSciences.
    16. Francisco Ledesma & Manuel Navarro & Jorge Perez & Simón Sosvilla, 1998. "Purchasing power parity and uncovered interest parity: The Spanish case," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 4(4), pages 335-348, November.
    17. Cletus C. Coughlin & Patricia S. Pollard, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers 2003-029, Federal Reserve Bank of St. Louis.
    18. Carlo Gola, 2000. "Export pricing strategy of Italian firms: from the depreciation of the lira to the euro," LIUC Papers in Economics 77, Cattaneo University (LIUC).
    19. Philippe Ducos & François Lecointe, 1990. "Effets d'hystérésis sur le commerce extérieur américain," Économie et Prévision, Programme National Persée, vol. 94(3), pages 79-93.
    20. David Ansic & Geoffrey Pugh, "undated". "An experimental test of trade hysteresis: market exit and entry decisions in the presence of sunk costs and exchange rate uncertainty," Working Papers 002, Staffordshire University, Business School.
    21. Bown, Chad & Porto, Guido, 2010. "Exporters in Developing Countries: Adjustment to Foreign Market Access after a Trade Policy Shock," Papers 88, World Trade Institute.
    22. Laurent Didier, 2020. "Exchange rate regimes, trade in raw materials and exporters behavior: Evidence from some Small Island Developing States (SIDS)," Economics Bulletin, AccessEcon, vol. 40(4), pages 2894-2919.

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