✦ LIBER ✦

The real exchange rate and US manufacturing profits: a theoretical framework with some empirical support

✍ Scribed by Richard H. Clarida

Publisher: John Wiley and Sons
Year: 1997
Tongue: English
Weight: 205 KB
Volume: 2
Category: Article
ISSN: 1076-9307
DOI: 10.1002/(sici)1099-1158(199707)2:3<177::aid-ijfe50>3.0.co;2-u

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✦ Synopsis

This paper studies the relationship between the real exchange rate and manufacturing pro®ts using Marston's model of pricing-to-market. Looking at US data, we ®nd that a sustained real depreciation of the dollar has a signi®cant and substantial in¯uence on manufacturing pro®ts. During the early 1980s, the appreciation of the dollar reduced pro®ts by at least 25% conditional on the realized time path of sales, costs, and the US markup. The post-plaza depreciation of the dollar boosted pro®ts at least 30%.