TY  - JOUR
AU  - Parsley,David C.
AU  - Wei,Shang-Jin
TI  - Insignificant and Inconsequential Hysteresis: The Case of the U.S.      Bilateral Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4738
PY  - 1994
Y2  - May 1994
UR  - http://www.nber.org/papers/w4738
L1  - http://www.nber.org/papers/w4738.pdf
N1  - Author contact info:
david parsley
Owen Graduate School
Vanderbilt University
Nashville, TN  37203
Tel: 615.322.0649
Fax: 615.343.7177
E-Mail: david.parsley@vanderbilt.edu

Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - This paper casts doubt on the validity of the hysteresis hypothesis as an explanation of the persistent U.S. trade deficits in the 1980s.  We propose two tests to investigate two different implications of the hypothesis.  The first implication is that cumulative changes in exchange rates, in addition to current exchange rate levels, are important determinants of trade flows.  The second implication is that foreign exporting firms' perceptions of exchange rate volatility will affect their decisions to enter or exit the market.  We find little support for either aspect of the hysteresis hypothesis.
ER  -