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Exchange rate hysteresis in the UK imports from the South Asian Countries
journal contributionposted on 2018-04-09, 15:50 authored by Nusrate Aziz, Ahmad Hassan AhmadAhmad Hassan Ahmad
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.
- Business and Economics
Published inInternational Review of Economics and Finance
CitationAZIZ, N. and AHMAD, A.H., 2018. Exchange rate hysteresis in the UK imports from the South Asian Countries. International Review of Economics and Finance, 58, pp. 159-178.
- AM (Accepted Manuscript)
Publisher statementThis work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/
NotesThis paper was published in the journal International Review of Economics and Finance and the definitive published version is available at https://doi.org/10.1016/j.iref.2018.03.007.