A test for strong hysteresis in international trade

Vladimir Teles () and Ricardo Sávio Denadai

No 195, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: The article suggests a new test for strong hysteresis in international trade. The variables that capture the effects of hysteresis are based on the model of Dixit (1989) with calibrations using a state-space model to determine the parameters for each point in time. These variables are then applied to a cointegration test with breaks, where it is possible to verify whether the hysteresis effect is essential in determining the long-term equilibrium.

Date: 2009-08-26
New Economics Papers: this item is included in nep-ecm and nep-int
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