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Hysteresis in Exports

Author

Listed:
  • Giorgia Giovannetti
  • Hossein Samiei

Abstract

This paper presents an empirical examination of the importance of hysteresis in international trade. An econometric model of export determination is developed where the presence of sunk costs causes discontinuous behavior and hysteresis so that individual exporters’ decision to stay in or out of the market depends on the current value of the exchange rate as well as its past history. The aggregate level of exports is then determined by the proportion of exporters that stay in the market. The resulting non-linear model is estimated using data on manufacturing exports for the United States, Germany, and Japan. The paper finds strong evidence in favor of the presence of pricing-to-market and hysteresis only in the case of Japanese exports.

Suggested Citation

  • Giorgia Giovannetti & Hossein Samiei, 1995. "Hysteresis in Exports," IMF Working Papers 1995/052, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1995/052
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    Cited by:

    1. Bruno Amable & Jerome Henry & Frederic Lordon & Richard Topol, 2004. "Complex Remanence vs. Simple Persistence: Are Hysteresis and Unit-Root Processes Observationally Equivalent?," International Symposia in Economic Theory and Econometrics, in: Economic Complexity, pages 67-89, Emerald Group Publishing Limited.
    2. Ansgar Belke & Ulrich Volz, 2020. "The Yen Exchange Rate and the Hollowing Out of the Japanese Industry," Open Economies Review, Springer, vol. 31(2), pages 371-406, April.
    3. Gilles Saint-Paul, 2009. "Le dollar, l’innovation et l’emploi," Revue d'Économie Financière, Programme National Persée, vol. 94(1), pages 107-115.
    4. Keld Laursen & Valentina Meliciani, 2000. "The importance of technology-based intersectoral linkages for market share dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(4), pages 702-723, December.
    5. Carlin, Wendy & Glyn, Andrew & Van Reenen, John, 2001. "Export Market Performance of OECD Countries: An Empirical Examination of the Role of Cost Competitiveness," Economic Journal, Royal Economic Society, vol. 111(468), pages 128-162, January.
    6. 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.
    7. Marco Alderighi & Alberto A. Gaggero, 2012. "Air Accessibility and Export Capability of the Italian Manufacturing Industry," L'industria, Società editrice il Mulino, issue 4, pages 635-662.
    8. 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.

    More about this item

    Keywords

    WP; exchange rate; supply and demand export model; export function; cost condition; price equation; export volume; firms initiate; equation quantity; export model; currency terms; labor costs ct; Exchange rates; Exports; Export prices; Exchange rate adjustments; Currencies;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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