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Investment in Manufacturing, Exchange-Rates and External Exposure

  • Jose Campa
  • Linda S. Goldberg

This paper studies the linkage between exchange rates and investment. emphasizing the role of producer exposure through export sales and through imported inputs into production. For two-digit United States manufacturing sectors we present time series of export shares and imported input shares. On average. manufacturing sectors have evolved from being primarily export exposed in the 1970s to being primarily import exposed by the early 1980s. Due to this pattern in exposure. exchange rate appreciations reduced investment in durable goods sectors in the 1970s and stimulated investment after 1983. By contrast nondurables sectors tended to absorb exchange rate changes in price over cost markups. Exchange rate volatility depressed investment but the effects were quantitatively small.

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File URL: http://www.nber.org/papers/w4378.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4378.

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Date of creation: Jun 1993
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Publication status: published as Journal of International Economics, (May 1995), vol 38, pp 297-320
Handle: RePEc:nbr:nberwo:4378
Note: ITI IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  9. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November.
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  11. Thomas VON UNGERN-STERNBERG & C.C. VON WEIZSAECKER, 1989. "Strategic foreign exchange management," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 8905, Université de Lausanne, Faculté des HEC, DEEP.
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