Some Empirical Evidence on Hysteresis in Aggregate US Import Prices

Richard Baldwin

No 2483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper empirically investigates the hypothesis that hysteresis has occurred in US aggregate non-oil import prices. We find strong evidence that a shift has occurred in the exchange rate pass-through relationship in the 1980~~ and that the nature of the shift is consistent with the hysteresis hypothesis. Results on two specific structural models of this phenomenon (the beachhead model and the bottleneck model) are less conclusive. The data broadly support both models, but neither by itself can provide a convincing accounting of all the evidence.

Date: 1988-01
Note: ITI IFM
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Published as Baldwin, Richard E. "Hysteresis In Import Prices: The Beachhead Effect," American Economic Review, 1988, v78(4), 773-785.
Published as Gerlach, Stephan and Peter Petri (eds.) The Economics of the Dollar Cycle. MIT Press, 1990.

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