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Does Exchange Rate Appreciation 'Deindustrialize' the Open Economy? A Critique of U.S. Evidence

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  • Glick, Reuven
  • Hutchison, Michael M

Abstract

This paper takes a critical look at the conventional view that the dollar exchange rate appreciation during the early 1980s caused a major resource shift in the U.S. economy away from tradables production, such as manufactures, toward nontradables production. We argue that the association of a dollar appreciation with relative strength or weakness in the tradable goods sector depends on the particular shock causing the appreciation, and consequently that the relation between exchange rates and the sectoral composition of output is unlikely to be stable over time. Our empirical analysis finds evidence of instability in the exchange rate--sectoral output link and of a positive association between tradables output and fiscal stimulus. Copyright 1990 by Oxford University Press.

Suggested Citation

  • Glick, Reuven & Hutchison, Michael M, 1990. "Does Exchange Rate Appreciation 'Deindustrialize' the Open Economy? A Critique of U.S. Evidence," Economic Inquiry, Western Economic Association International, vol. 28(1), pages 19-37, January.
    • Handle: RePEc:oup:ecinqu:v:28:y:1990:i:1:p:19-37
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    Cited by:

    1. Bahmani-Oskooee Mohsen & Mirzaie Aghdas, 2000. "The Long-Run Effects of Depreciation of The Dollar on Sectoral Output," International Economic Journal, Taylor & Francis Journals, vol. 14(3), pages 51-61.
    2. Tatom, John, 2004. "Manufacturing employment, productivity and the business cycle," MPRA Paper 4351, University Library of Munich, Germany.
    3. Kandil, Magda & Mirzaie, Ida Aghdas, 2003. "The effects of dollar appreciation on sectoral labor market adjustments: Theory and evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 89-117.
    4. John A. Tatom, 1994. "Currency appreciation and \"deindustrialization\": a European perspective," Working Papers 1992-006, Federal Reserve Bank of St. Louis.
    5. Mohsen Bahmani-Oskooee & Ida A. Mirzaie & Ilir Miteza, 2007. "Sectoral Employment, Wages and the Exchange Rate: Evidence from the U.S," Eastern Economic Journal, Eastern Economic Association, vol. 33(1), pages 125-136, Winter.

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