During the 1980s, policy advisers were successful in promoting the view that movements in the value of the dollar have an inverse relationship to U.S. international competitiveness. This article explains their hypothesis, as well as the counterargument that exchange rates positively reflect a country's competitiveness. Economic policies that boost competitiveness also raise the value of the domestic currency. The mirror image of these hypotheses apply to U.S. trading partners, including Europe. The evidence indicates that European countries were not "deindustralized" from 1985 to 1990, when the ECU rose in value by more than the dollar had risen in 1980-1985. Instead, European competitiveness rebounded strongly in the late-1980s, reversing the stagnant performance of the early-1980s. Similarly, during the early-1980s, when the United States was, on one unsupported view, deindustralizing, European nations generally did not enjoy a surge in their share of output or capital formation. Instead, they suffered from "Euroscierosis".
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
1992-006.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)