The Real Exchange Rate and US Manufacturing Profits: A Theoretical Framework with Some Empirical Support

Richard Clarida

International Journal of Finance & Economics, 1997, vol. 2, issue 3, 177-87

Abstract: This paper studies the relationship between the real exchange rate and manufacturing profits using Marston's model of pricing-to-market. Looking at US data, we find that a sustained real depreciation of the dollar has a significant and substantial influence on manufacturing profits. During the early 1980s, the appreciation of the dollar reduced profits 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 profits at least 30%. Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.

Date: 1997
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Working Paper: The real exchange rate and US manufacturing profits: a theoretical framework with some empirical support (1992)
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