Nominal Exchange Rate Patterns: Correlationswith Entry, Exit, and Invesment in U.S. Industry
AbstractThe view that the strength of the dollar in the early 1980s was associated with persistent restructuring of United States industry is supported by correlations between exchange rate patterns and data on business formation, business failure and sectoral investment in new plant and equipment. Short term trend depreciations of the dollar are associated with reallocation of resources across sectors, while longer term trend depreciations are associated with investment expansions in many sectors of industry. Persistent exchange rate volatility is strongly associated with investment contractions, with this effect weakest during depreciation periods. This suggests a second order effect of depreciation trends: during trend depreciation periods the negative and significant correlation between exchange rate volatility and investment is reduced.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3249.
Date of creation: Jan 1990
Date of revision:
Publication status: published as "Exchange Rates and Investment in United States Industry", Review of Economics and Statistics, (November 1993) vol 75, no4, pp 575-588
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