The effect of exchange rates on prices, wages, and profits: a case study of the United Kingdom in the 1990s

Joseph Gagnon

No 772, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: During the 1990s the United Kingdom experienced large and sudden exchange rate movements that had no apparent impact on overall consumer prices. This paper shows that the stability of U.K. consumer prices was made possible in part by offsetting movements in the price-cost margins of foreign exporters and in part by offsetting price-cost margins in the U.K. distribution sector. At the same time, U.K. manufacturers experienced margin swings in the opposite direction, largely due to their role as exporters. Thus, sterling depreciation boosted the profits of U.K. manufacturers and squeezed the profits of U.K. distributors, while sterling appreciation had the opposite effects.

Keywords: Foreign; exchange; rates (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-lab
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Related works:
Journal Article: The effect of exchange rates on prices, wages, and profits: A case study of the United Kingdom in the 1990s (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:772

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