Currency appreciation and "deindustrialization": a European perspective
During the 1980s, policy advisers were successful in promoting the view that movements in the value of the dollar have an inverse relationship to U.S. international competitiveness. This article explains their hypothesis, as well as the counterargument that exchange rates positively reflect a country's competitiveness. Economic policies that boost competitiveness also raise the value of the domestic currency. The mirror image of these hypotheses apply to U.S. trading partners, including Europe. The evidence indicates that European countries were not "deindustralized" from 1985 to 1990, when the ECU rose in value by more than the dollar had risen in 1980-1985. Instead, European competitiveness rebounded strongly in the late-1980s, reversing the stagnant performance of the early-1980s. Similarly, during the early-1980s, when the United States was, on one unsupported view, deindustralizing, European nations generally did not enjoy a surge in their share of output or capital formation. Instead, they suffered from "Euroscierosis".
|Date of creation:||1994|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 442, St. Louis, MO 63166|
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan C. Stockman & Lars E.O. Svensson, 1985.
"Capital Flows, Investment, and Exchange Rates,"
NBER Working Papers
1598, National Bureau of Economic Research, Inc.
- Robert Solomon, 1985. "Effects of the strong dollar," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 65-92.
- Koester, Reinhard B & Kormendi, Roger C, 1989. "Taxation, Aggregate Activity and Economic Growth: Cross-Country Evidence on Some Supply-Side Hypotheses," Economic Inquiry, Western Economic Association International, vol. 27(3), pages 367-86, July.
- Georg Winckler, 1991. "Exchange Rate Appreciation As a Signal of a New Policy Stance," IMF Working Papers 91/32, International Monetary Fund.
- William H. Branson, 1986. "The Limits of Monetary Coordination As Exchange Rate Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 175-194.
- Razin, Assaf, 1984. "Capital movements, intersectoral resource shifts and the trade balance," European Economic Review, Elsevier, vol. 26(1-2), pages 135-152.
- Heinz Gluck & Dieter Proske & John A. Tatom, 1992. "Monetary and exchange rate policy in Austria: an early example of policy coordination," Working Papers 1992-005, Federal Reserve Bank of St. Louis.
- Reuven Glick & Michael M. Hutchison, 1988.
"Does exchange rate appreciation 'deindustrialize' the open economy? a critique of U.S. evidence,"
Working Papers in Applied Economic Theory
88-04, Federal Reserve Bank of San Francisco.
- Glick, Reuven & Hutchison, Michael M, 1990. "Does Exchange Rate Appreciation 'Deindustrialize' the Open Economy? A Critique of U.S. Evidence," Economic Inquiry, Western Economic Association International, vol. 28(1), pages 19-37, January.
- Stephen A. Meyer, 1986. "Trade deficits and the dollar: a macroeconomic perspective," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-25.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
- Robert Z. Lawrence, 1983. "Is Trade Deindustrializing America? A Medium-Term Perspective," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 129-172.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1992-006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.