A test for hysteresis in international trade

Abstract

The article suggests a new test for strong hysteresis, that is, at the macro level, in international trade. The variables that capture the effects of hysteresis are based on a theoretical model 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.