Author : Richard H. Clarida
Publisher :
ISBN 13 :
Total Pages : 21 pages
Book Rating : 4.:/5 (244 download)
Book Synopsis The Real Exchange Rate, Exports, and Manufacturing Profits by : Richard H. Clarida
Download or read book The Real Exchange Rate, Exports, and Manufacturing Profits written by Richard H. Clarida and published by . This book was released on 1991 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the relationship between manufacturing profits, exports, and the real exchange rate. Using Harston's (1990) model of pricing-to-market, we derive a co-integrated log-linear profits equation that restricts the long-run relationship among real U.S. manufacturing profits, domestic sales, the real exchange rate, real unit costs, the U.S. relative price of output, and foreign sales. We show that the elasticity of real profits with respect to the real exchange rate is bounded below by the product of (i) 1 minus the long-run pass-through coefficient and (ii) the ratio of export revenues to total profits. Our empirical findings suggest that, even after taking into account output, costs, and relative prices, real exchange rate fluctuations have a sizable and statistically significant influence on real U.S. manufacturing profits. The framework developed in this paper appears to be of some value in directing attention towards a heretofore underappreciated channel through which real exchange rate changes can potentially influence national savings.