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Sunk Cost Hysteresis in Turkish Manufacturing Exports

Author

Listed:
  • Kurmas Akdogan
  • Laura Werner

Abstract

This article examines hysteresis in export entry-exit decisions of the Turkish manufacturing sector using the Preisach method. As the argument goes, sunk costs imply threshold levels of the exchange rate affecting the export market entry-exit behaviour of firms. The wait-and-see behaviour of firms in between these thresholds results in hysteresis in export markets at the aggregated level. Our results suggest sunk cost hysteresis for five subsectors of the Turkish manufacturing sector: clothing, textiles, machinery, tobacco products and communication equipment. The article also provides a more detailed look on the determinants of hysteresis behaviour in the clothing sector.

Suggested Citation

  • Kurmas Akdogan & Laura Werner, 2021. "Sunk Cost Hysteresis in Turkish Manufacturing Exports," Working Papers 2136, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2136
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-36
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    Cited by:

    1. Jeong, Jaehoon & Yang, Jae-Suk, 2023. "Why do some firms stop exporting?," International Business Review, Elsevier, vol. 32(4).

    More about this item

    Keywords

    Hysteresis; Exports; Preisach method; Nonlinearity; Path-dependency;
    All these keywords.

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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