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The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time-Series Analysis

Robert Blecker ()

No 2006-07, Working Papers from American University, Department of Economics

Abstract: This paper analyzes the effects of the real value of the dollar on investment in US domestic manufacturing using aggregate data for 1973-2004. Econometric estimation shows a negative effect that is much larger than has been found in any previous study. The exchange rate affects investment mainly, although not exclusively, through the channel of financial or liquidity constraints, rather than by affecting the desired stock of capital. Counterfactual simulations show that US manufacturing investment would have been 61% higher and the capital stock would have been 17% higher in 2004 if the dollar had not appreciated after 1995.

Keywords: investment; manufacturing; exchange rate; US dollar; profits; US economy (search for similar items in EconPapers)
JEL-codes: E22 E25 F31 L60 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2006-08
New Economics Papers: this item is included in nep-fmk, nep-ifn and nep-mac
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Citations: View citations in EconPapers (7) Track citations by RSS feed

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https://doi.org/10.17606/pjdx-jc63 First version, 2006 (application/pdf)

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