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Measuring the Effects of Exchange Rate Changes on Investment in Australian Manufacturing Industry

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  • ROBYN SWIFT

Abstract

This paper examines the relationship between exchange rates and investment in Australian manufacturing between 1988 and 2001. The effects of exchange rates on investment are found to vary positively with the export share of sales and negatively with the share of imported inputs into production, with lower price‐over‐cost mark‐ups increasing the response. For Australian manufacturing, a 10 per cent real appreciation of the Australian dollar leads to an average 8.0 per cent decrease in total investment through the export share channel, and an average 3.8 per cent increase through the imported input share channel, with most of the response occurring through investment in equipment, plant and machinery.

Suggested Citation

  • Robyn Swift, 2006. "Measuring the Effects of Exchange Rate Changes on Investment in Australian Manufacturing Industry," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 19-25, September.
    • Handle: RePEc:bla:ecorec:v:82:y:2006:i:s1:p:s19-s25
    DOI: 10.1111/j.1475-4932.2006.00329.x
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    References listed on IDEAS

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    Cited by:

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    2. Lynne Cockerell & Steven Pennings, 2007. "Private Business Investment in Australia," RBA Research Discussion Papers rdp2007-09, Reserve Bank of Australia.

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