The Real Exchange Rate and US Manufacturing Profits: A Theoretical Framework with Some Empirical Support
This paper studies the relationship between the real exchange rate and manufacturing profits using Marston's model of pricing-to-market. Looking at US data, we find that a sustained real depreciation of the dollar has a significant and substantial influence on manufacturing profits. During the early 1980s, the appreciation of the dollar reduced profits by at least 25% conditional on the realized time path of sales, costs, and the US markup. The post-plaza depreciation of the dollar boosted profits at least 30%. Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.
Volume (Year): 2 (1997)
Issue (Month): 3 (July)
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