EconPapers    
Economics at your fingertips  
 

Do Falling Import Prices Increase Market Demand for Domestically Produced Consumer Goods?

John Heim ()

Rensselaer Working Papers in Economics from Rensselaer Polytechnic Institute, Department of Economics

Abstract: Rising exchange rates can lower prices on imported consumer goods. The lower prices have two effects. A substitution effect shifts in demand from domestically produced goods to imports. An income effect also allows more import purchases. It also allows some income previously spent on imports to be shifted to domestic spending. This shift may or may not increase total demand for U.S. consumer goods. This paper finds it does, and that increases in demand for domestically produced consumer goods and services are about five times as large as the increase in demand for imported consumer goods and services. The paper also finds that the increase in demand for domestic goods is about three times as large as the increase in the trade deficit resulting from the higher exchange rate.

JEL-codes: E00 F40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-mac
Date: 2007-07
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.economics.rpi.edu/workingpapers/rpi0707.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rpi:rpiwpe:0707

Access Statistics for this paper

More papers in Rensselaer Working Papers in Economics from Rensselaer Polytechnic Institute, Department of Economics Contact information at EDIRC.
Series data maintained by Shawn Kantor (). This e-mail address is bad, please contact .

 
Page updated 2017-11-16
Handle: RePEc:rpi:rpiwpe:0707