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The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time-Series Analysis

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  • Robert A. Blecker

Abstract

This article analyses the effects of the real value of the dollar on investment in US domestic manufacturing using aggregate data for 1973-2004. Econometric estimation shows a negative effect that is much larger than has been found in any previous study. The exchange rate affects investment mainly, although not exclusively, through the channel of financial or liquidity constraints, rather than by affecting the desired stock of capital. Counterfactual simulations show that US manufacturing investment would have been 61% higher and the capital stock would have been 17% higher in 2004 if the dollar had not appreciated after 1995.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 21 (2007)
Issue (Month): 4 ()
Pages: 491-517

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Handle: RePEc:taf:irapec:v:21:y:2007:i:4:p:491-517

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Keywords: Investment; manufacturing; exchange rate; US dollar; profits; US economy;

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References

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  1. Robert S. Chirinko & Huntley Schaller, 1993. "Why does liquidity matter in investment equations?," Research Working Paper 93-13, Federal Reserve Bank of Kansas City.
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  11. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Do Prices Matter?
    by JW Mason in The Slack Wire on 2011-04-17 01:16:00

RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Political Economy > The Political Economy of the US
  2. > Political Economy > The Political Economy of the US
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Cited by:
  1. Eliane Cristina de Araújo, 2011. "Volatilidade Cambial e Crescimento Econômico: Teorias e Evidências para Economias em Desenvolvimento e Emergentes (1980 e 2007)," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 12(2), pages 187_213.
  2. Blecker, Robert A., 2009. "External Shocks, Structural Change, and Economic Growth in Mexico, 1979-2007," World Development, Elsevier, vol. 37(7), pages 1274-1284, July.
  3. Robert A. Blecker, 2008. "External Shocks, Structural Change, and Economic Growth in Mexico 1979–2006," Working Papers 2008-04, American University, Department of Economics.
  4. Lima, Gilberto Tadeu & Porcile, Gabriel, 2011. "Economic growth and income distribution with heterogeneous preferences on the real exchange rate," MPRA Paper 32356, University Library of Munich, Germany.
  5. Garcia-Jimenez, Carlos I. & Mishra, Ashok K., 2010. "The Effects of Public Debt on Labor Demand in the United States," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56361, Southern Agricultural Economics Association.
  6. Thomas I. Palley, 2006. "Rethinking Trade and Trade Policy: Gomory, Baumol, and Samuelson on Comparative Advantage," Economics Public Policy Brief Archive ppb_86, Levy Economics Institute.
  7. Bahmani-Oskooee, Mohsen & Hajilee, Massomeh, 2013. "Exchange rate volatility and its impact on domestic investment," Research in Economics, Elsevier, vol. 67(1), pages 1-12.

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