Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210841 
Year of Publication: 
2018
Series/Report no.: 
CREDIT Research Paper No. 18/03
Publisher: 
The University of Nottingham, Centre for Research in Economic Development and International Trade (CREDIT), Nottingham
Abstract: 
We investigate and find evidence for the hysteresis hypothesis in UK imports from South Asian countries, using a monthly sample data that covers 1999 to 2012. This paper finds evidence of the asymmetric effect of exchange rate volatility that "large" depreciations significantly reduce UK imports from Bangladesh; however, "large" appreciations do not increase the imports significantly. We also find a partial support for the hysteresis hypothesis in UK import from India, Pakistan and Sri Lanka. We find that hysteresis can be both country- and commodity-dependent, which is largely consistent with previous empirical studies. Theoretical literature suggests that hysteresis occurs due to the presence of sunk costs, however, we find that hysteresis occurs even beyond the sunk costs.
Subjects: 
Hysteresis hypothesis
sunk costs
exchange rate
bilateral trade
JEL: 
C22
F31
F32
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.