Does exchange rate appreciation 'deindustrialize' the open economy? a critique of U.S. evidence
Since the fiscal expansion and real appreciation of the dollar in the early 1980s, widespread attention has focused on the so-called "deindustrialization" and "two-tiered" development of the U.S. economy. This view argues that exchange rate appreciation caused a major resource shift away from tradables production, such as manufactures, toward nontradables production in the economy. In this paper we take a critical look at this view. ; We argue that the association of a dollar appreciation with relative strength or weakness in the tradable goods sector depends on the particular shock causing the appreciation, and the extent to which it is exogenous or policy induced. This suggests that the relation between exchange rates and the sectoral composition of output is unlikely to be stable over time as the nature of underlying economic shocks varies. ; In analyzing the empirical support for the "two-tiered" hypothesis, we show that the negative association between dollar appreciation and tradable goods output is sample specific, and not stable over time. In empirical attempts to link U.S. sectoral output growth to underlying shocks, we cannot reject the hypothesis that tradables output is positively associated with fiscal stimulus.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1988|
|Contact details of provider:|| Postal: P.O. Box 7702, San Francisco, CA 94120-7702|
Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
More information through EDIRC
|Order Information:|| Email: |