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Exchange Rate Hysteresis: The Effects of Overshooting and Short‐Termism

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  • W David McCausland

Abstract

The present paper addresses two questions. First, how does exchange rate overshooting affect hysteresis in trade and competitiveness? Second, how does ‘short‐termism’ alter the magnitude of such hysteresis effects? The paper models the dynamic processes of hysteresis in trade and competitiveness in terms of the presence of discrete, asymmetric lump‐sum costs of entry, in response to unanticipated foreign policy shocks. The paper produces some important new insights into the role of short run adjustment processes in understanding persistence effects in key macroeconomic indicators.

Suggested Citation

  • W David McCausland, 2002. "Exchange Rate Hysteresis: The Effects of Overshooting and Short‐Termism," The Economic Record, The Economic Society of Australia, vol. 78(240), pages 60-67, March.
    • Handle: RePEc:bla:ecorec:v:78:y:2002:i:240:p:60-67
    DOI: 10.1111/1475-4932.00039
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    Cited by:

    1. Sergio Da Silva & Guilherme Moura & Roberto Meurer, 2005. "Travel hysteresis in the US current account after the mid-1980s," Economics Bulletin, AccessEcon, vol. 14(2), pages 1-10.
    2. repec:ebl:ecbull:v:14:y:2005:i:2:p:1-10 is not listed on IDEAS
    3. Antoine Bouveret & Henri Sterdyniak, 2005. "Les modèles de taux de change," SciencePo Working papers Main hal-01071965, HAL.
    4. Mahadevan, Renuka & Suardi, Sandy, 2008. "A dynamic analysis of the impact of uncertainty on import- and/or export-led growth: The experience of Japan and the Asian Tigers," Japan and the World Economy, Elsevier, vol. 20(2), pages 155-174, March.
    5. repec:spo:wpecon:info:hdl:2441/5285 is not listed on IDEAS
    6. Sergio Da Silva & Guilherme Moura & Roberto Meurer, 2005. "Travel hysteresis in the Brazilian current account," Economics Bulletin, AccessEcon, vol. 6(24), pages 1-17.
    7. repec:spo:wpmain:info:hdl:2441/5285 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/5285 is not listed on IDEAS
    9. repec:hal:wpspec:info:hdl:2441/5285 is not listed on IDEAS

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