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The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time-Series Analysis

  • ROBERT A. BLECKER

    ()

    (Department of Economics, American University)

This paper analyzes the effects of the real value of the dollar on investment in US domestic manufacturing using aggregate data for 1973-2004. Econometric estimation shows a negative effect that is much larger than has been found in any previous study. The exchange rate affects investment mainly, although not exclusively, through the channel of financial or liquidity constraints, rather than by affecting the desired stock of capital. Counterfactual simulations show that US manufacturing investment would have been 61% higher and the capital stock would have been 17% higher in 2004 if the dollar had not appreciated after 1995.

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File URL: http://w.american.edu/cas/economics/repec/amu/workingpapers/2006-07.pdf
File Function: First version, 2006
Download Restriction: no

Paper provided by American University, Department of Economics in its series Working Papers with number 2006-07.

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Length: 46 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:amu:wpaper:0706
Contact details of provider: Web page: http://www.american.edu/cas/economics/

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  18. Marc Lavoie & Gabriel Rodriguez & Mario Seccareccia, 2004. "Similitudes and Discrepancies in Post-Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 127-149.
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