Hysteresis and the foreign trade of Brazilian industrialized products

Abstract

This article investigates the hypothesis of hysteresis for the Brazilian manufactured exports between 1985 and 2005, and for imports between 1996 and 2008. Hysteresis is understood as the occurrence of permanent effects on the quantities and prices of products imported or exported due to temporary shocks in the exchange rate, changing thus the structure of trade. In order to investigate that it was used an empirical measure of strong hysteresis (macroeconomic) developed by Piscitelli et al. (2000) and tested its significance in sectoral equations of supply and demand for exports and in demand equations for imports. The results show that Brazilian manufactured exports are strongly determined by international demand. They also show that to explain the exports performance, the most relevant empirical measure of relative prices was the ratio between international prices and national export prices. With respect to the hysteresis hypothesis, it was rejected for the aggregate of manufactured exports, but accepted in some industrial sectors. For imports, this hypothesis was accepted for aggregate manufactured imports and for ten industrial sectors.