Travel Hysteresis in the US Current Account After the Mid-1980s

Roberto Meurer, Federal University of Santa Catarina
Guilherme Moura, University of Kiel
Sergio Da Silva, Federal University of Santa Catarina

Abstract

Following the real appreciation of the US dollar in the first half of the 1980s, travel expenditures in the current account soared. Employing standard regression techniques as well as Markov−switching regime analysis we show that such expenditures did not return to their pre−appreciation levels thereafter. The permanent increase suggests the presence of travel hysteresis in the US current account after the mid−1980s.