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Title: Exchange rate hysteresis in the UK imports from the South Asian countries
Authors: Aziz, Nusrate
Ahmad, A.H.
Keywords: Hysteresis hypothesis
Sunk costs
Exchange rates
Recursive estimate
Issue Date: 2018
Publisher: © Elsevier
Citation: AZIZ, 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.
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.
Description: This paper is closed access until 22 March 2019.
Version: Accepted for publication
DOI: 10.1016/j.iref.2018.03.007
URI: https://dspace.lboro.ac.uk/2134/32509
Publisher Link: https://doi.org/10.1016/j.iref.2018.03.007
ISSN: 1059-0560
Appears in Collections:Closed Access (Economics)

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