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Investment in manufacturing, exchange rates and external exposure

  • Campa, Jose
  • Goldberg, Linda S.

This paper studies the linkage between exchange rates and investment. emphasizing the role of producer exposure through export sales and through imported inputs into production. For two-digit United States manufacturing sectors we present time series of export shares and imported input shares. On average. manufacturing sectors have evolved from being primarily export exposed in the 1970s to being primarily import exposed by the early 1980s. Due to this pattern in exposure. exchange rate appreciations reduced investment in durable goods sectors in the 1970s and stimulated investment after 1983. By contrast nondurables sectors tended to absorb exchange rate changes in price over cost markups. Exchange rate volatility depressed investment but the effects were quantitatively small.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 38 (1995)
Issue (Month): 3-4 (May)
Pages: 297-320

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Handle: RePEc:eee:inecon:v:38:y:1995:i:3-4:p:297-320
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  22. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
  23. Goldberg, Linda S, 1993. "Exchange Rates and Investment in United States Industry," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 575-88, November.
  24. de Meza, David & van der Ploeg, Frederick, 1987. "Production Flexibility as a Motive for Multinationality," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 343-51, March.
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