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Dollar Appreciation and Manufacturing Employment and Output

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  • William H. Branson
  • James P. Love

Abstract

This paper examines the impact of the movements in the real exchange rate on employment and output in U.S. manufacturing industries. We use a simple model of supply and demand to estimate the elasticity of manufacturing employment and output with respect to the real exchange rate, at different levels of aggregation. The data are quarterly, covering two time periods -- 1963:1 to 1985:1 and 1972:1 to 1985:1. The employment estimates include 20 manufacturing sectors at the 2-digit SIC level, 125 sectors at the 3-digit SIC level, 176 sectors at the 4-digit SIC level. In addition, we disaggregate manufacturing employment regionally by the 50 states plus the District of Columbia. The output estimates include 80 sectors of industrial production at different levels of aggregation. We check for consistency by considering the impact of aggregation among the 2-,3-, and 4-digit employment estimates, and by comparing the estimates for employment to those for output. We find that exchange rate movements have had important effects on the manufacturing sector, and in particular, the durable goods sector, including primary metals, fabricated metal products, and non-electrical machinery. Other sectors that suffer large employment loses when the dollar appreciates are stone, clay and glass products, transportation, instruments, textiles and apparel, chemicals, rubber and leather goods.

Suggested Citation

  • William H. Branson & James P. Love, 1986. "Dollar Appreciation and Manufacturing Employment and Output," NBER Working Papers 1972, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1972
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    References listed on IDEAS

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    1. Grossman, Gene M., 1986. "Imports as a cause of injury: The case of the U.S. steel industry," Journal of International Economics, Elsevier, vol. 20(3-4), pages 201-223, May.
    2. William H. Branson, 1985. "Causes of appreciation and volatility of the dollar," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 33-63.
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    Cited by:

    1. Dai, Mi & Xu, Jianwei, 2017. "Firm-specific exchange rate shocks and employment adjustment: Evidence from China," Journal of International Economics, Elsevier, vol. 108(C), pages 54-66.
    2. Hua, Ping, 2007. "Real exchange rate and manufacturing employment in China," China Economic Review, Elsevier, vol. 18(3), pages 335-353.
    3. Guzin Emel Akkus, 2016. "The Effects of Import Competition on Employment and Wages in the Manufacturing Industry of Turkey," Eurasian Journal of Social Sciences, Eurasian Publications, vol. 4(1), pages 50-58.
    4. Garcia-Jimenez, Carlos I. & Mishra, Ashok K., 2010. "The Effects of Public Debt on Labor Demand in the United States," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56361, Southern Agricultural Economics Association.
    5. Campbell, Douglas L., 2020. "Relative Prices and Hysteresis: Evidence from US Manufacturing," European Economic Review, Elsevier, vol. 129(C).
    6. Ansgar Belke & Ulrich Volz, 2020. "The Yen Exchange Rate and the Hollowing Out of the Japanese Industry," Open Economies Review, Springer, vol. 31(2), pages 371-406, April.
    7. Stewart Ngandu, 2009. "The impact of exchange rate movements on employment: the economy-wide effect of a rand appreciation," Development Southern Africa, Taylor & Francis Journals, vol. 26(1), pages 111-129.
    8. Richard C. Marston & Guido Carli & Jacques Attali & John R. Petty & Robert Solomon, 1988. "Exchange Rate Coordination," NBER Chapters, in: International Economic Cooperation, pages 79-166, National Bureau of Economic Research, Inc.
    9. Stewart Ngandu, 2008. "Exchange Rates And Employment," South African Journal of Economics, Economic Society of South Africa, vol. 76(s2), pages 205-221, August.
    10. Ping HUA, 2005. "Real exchange rate and employment in the manufacturing sector in China," Working Papers 200528, CERDI.
    11. J. David Richardson, 1988. "Exchange Rates and U.S. Auto Competitiveness," NBER Chapters, in: Misalignment of Exchange Rates: Effects on Trade and Industry, pages 215-240, National Bureau of Economic Research, Inc.
    12. Douglas L. Campbell, 2013. "Relative Prices, Hysteresis, and the Decline of American Manufacturing," 2013 Papers pca584, Job Market Papers.

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