EXCHANGE RATE MOVEMENTS AND U.S. IMPORT MARKETS: LESSONS FROM THE 1980S
This article assesses the relevance of the hysteresis hypothesis for U.S. manufactured goods import markets in the 1980s. It extends previous work by developing a test of the hysteresis hypothesis which utilizes domestic industry output price and factor price data rather than import price data. By focusing on domestic firms' behavior, detailed industry-level analysis is possible, which allows for a more accurate testing of the hysteresis hypothesis than is possible in prior work utilizing more aggregated import data. In contrast to findings in the 1980s in support of the hysteresis hypothesis based on analyses of aggregated import price indices, this study finds very little support for the hysteresis hypothesis.
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