"International Crowding Out": Concept and Policy Implications

Peter Gray

Eastern Economic Journal, 1987, vol. 13, issue 3, 193-203

Abstract: The overvaluation of a currency "crowds out" the tradeable goods industries of the country and enhances the profit rates of foreign competitors. This asymmetry can bring about long-term changes in the competitiveness of the country's tradable goods industries, as for eign firms are able to use the quasirents to increase market share through aggressive promotion and large-scale investment in plant, product design, and personnel. The economic costs of an overvalued currency exceed those recognized by Martin Feldstein and the Reagan Administration.

Date: 1987
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