Article
Exchange rate hysteresis in the UK imports from the South Asian Countries
International Review of Economics & Finance
(2018)
Abstract
We investigate and find evidence for the hysteresis hypothesis in UK imports from South Asian countries, using a monthly sample of 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 imports 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.
Keywords
- Exchange rates,
- Sunk costs,
- Hysteresis hypothesis
Disciplines
Publication Date
Winter March 22, 2018
Citation Information
Nusrate Aziz. "Exchange rate hysteresis in the UK imports from the South Asian Countries" International Review of Economics & Finance (2018) ISSN: 1059-0560 Available at: http://works.bepress.com/nusrate_aziz/32/