IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/1992-006.html
   My bibliography  Save this paper

Currency appreciation and \"deindustrialization\": a European perspective

Author

Listed:
  • John A. Tatom

Abstract

During the 1980s, policy advisers were successful in promoting the view that movements in the value of the dollar have an inverse relationship to U.S. international competitiveness. This article explains their hypothesis, as well as the counterargument that exchange rates positively reflect a country's competitiveness. Economic policies that boost competitiveness also raise the value of the domestic currency. The mirror image of these hypotheses apply to U.S. trading partners, including Europe. The evidence indicates that European countries were not \"deindustralized\" from 1985 to 1990, when the ECU rose in value by more than the dollar had risen in 1980-1985. Instead, European competitiveness rebounded strongly in the late-1980s, reversing the stagnant performance of the early-1980s. Similarly, during the early-1980s, when the United States was, on one unsupported view, deindustralizing, European nations generally did not enjoy a surge in their share of output or capital formation. Instead, they suffered from \"Euroscierosis\".

Suggested Citation

  • John A. Tatom, 1994. "Currency appreciation and \"deindustrialization\": a European perspective," Working Papers 1992-006, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:1992-006
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/more/1992-006/
    Download Restriction: no
    File URL: http://research.stlouisfed.org/wp/1992/92-006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. William H. Branson, 1986. "The Limits of Monetary Coordination As Exchange Rate Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 175-194.
    2. Koester, Reinhard B & Kormendi, Roger C, 1989. "Taxation, Aggregate Activity and Economic Growth: Cross-Country Evidence on Some Supply-Side Hypotheses," Economic Inquiry, Western Economic Association International, vol. 27(3), pages 367-386, July.
    3. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.
    4. Stockman, Alan C. & Svensson, Lars E. O., 1987. "Capital flows, investment, and exchange rates," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 171-201, March.
    5. Glick, Reuven & Hutchison, Michael M, 1990. "Does Exchange Rate Appreciation 'Deindustrialize' the Open Economy? A Critique of U.S. Evidence," Economic Inquiry, Western Economic Association International, vol. 28(1), pages 19-37, January.
    6. Razin, Assaf, 1984. "Capital movements, intersectoral resource shifts and the trade balance," European Economic Review, Elsevier, vol. 26(1-2), pages 135-152.
    7. Mr. Georg Winckler, 1991. "Exchange Rate Appreciation As a Signal of a New Policy Stance," IMF Working Papers 1991/032, International Monetary Fund.
    8. Robert Solomon, 1985. "Effects of the strong dollar," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 65-92.
    9. Heinz Gluck & Dieter Proske & John A. Tatom, 1992. "Monetary and exchange rate policy in Austria: an early example of policy coordination," Working Papers 1992-005, Federal Reserve Bank of St. Louis.
    10. Robert Z. Lawrence, 1983. "Is Trade Deindustrializing America? A Medium-Term Perspective," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 129-172.
    11. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    12. Stephen A. Meyer, 1986. "Trade deficits and the dollar: a macroeconomic perspective," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-25.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frait, Jan & Komarek, Lubos, 2001. "Real exchange rate trends in transitional countries," Economic Research Papers 269366, University of Warwick - Department of Economics.
    2. Vlaar, Peter J.G., 2007. "GDP growth and currency valuation: The case of the dollar," Journal of International Money and Finance, Elsevier, vol. 26(8), pages 1424-1449, December.
    3. Feridun, M. & Isola, W.A., 2005. "Market Driven Reforms and the Structural Characteristics of Employment in Nigeria: An Econometric Analysis, 1986-2003," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John A. Tatom, 1995. "Currency Appreciation and ‘Deindustrialisation’: A European Perspective," The World Economy, Wiley Blackwell, vol. 18(4), pages 519-541, July.
    2. Song, Chi-Young, 1997. "The Real Exchange Rate and the Current Account Balance in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 11(2), pages 143-184, June.
    3. International Monetary Fund, 2001. "Interpreting Real Exchange Rate Movements in Transition Countries," IMF Working Papers 2001/056, International Monetary Fund.
    4. Balvers, Ronald J. & H. Bergstrand, Jeffrey, 1997. "Equilibrium real exchange rates: closed-form theoretical solutions and some empirical evidence," Journal of International Money and Finance, Elsevier, vol. 16(3), pages 345-366, June.
    5. Ms. Susana Garcia Cervero & J. Humberto Lopez & Mr. Enrique Alberola Ila & Mr. Angel J. Ubide, 1999. "Global Equilibrium Exchange Rates: Euro, Dollar, “Ins,” “Outs,” and Other Major Currencies in a Panel Cointegration Framework," IMF Working Papers 1999/175, International Monetary Fund.
    6. Chen, Xiaoshan & MacDonald, Ronald, 2015. "Measuring the dollar–euro permanent equilibrium exchange rate using the unobserved components model," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 20-35.
    7. repec:zbw:bofitp:2001_007 is not listed on IDEAS
    8. John E. Floyd, 1998. "Monetary Policy and the Real Exchange Rate: Some Evidence," Working Papers floyd-98-02, University of Toronto, Department of Economics.
    9. Xiaoshan Chen & Ronald MacDonald, 2010. "Revisiting the Dollar-Euro Permanent Equilibrium Exchange Rate: Evidence from Multivariate Unobserved Components Models," Working Papers 2010_16, Business School - Economics, University of Glasgow.
    10. Megumi Kubota, "undated". "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.
    11. John E. Floyd, 1995. "Uncovered Interest Parity: A Further Reconsideration," Working Papers floyd-95-01, University of Toronto, Department of Economics.
    12. De Broeck, Mark & Sloek, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland Institute for Emerging Economies (BOFIT).
    13. De Broeck, Mark & Sloek, Torsten, 2001. "Interpreting real exchange rate movements in transition countries," BOFIT Discussion Papers 7/2001, Bank of Finland, Institute for Economies in Transition.
    14. Tatom, John, 2004. "Manufacturing employment, productivity and the business cycle," MPRA Paper 4351, University Library of Munich, Germany.
    15. Alan C. Stockman, 1987. "The equilibrium to exchange rates," Economic Review, Federal Reserve Bank of Richmond, vol. 73(Mar), pages 12-30.
    16. Megumi Kubota, "undated". "Assessing the Real Exchange Rate Misalignments: Is Real Undervaluation of the Currency Likely and Can It Be Sustained?," Discussion Papers 09/25, Department of Economics, University of York.
    17. Lopez, Humberto & Molina, Luis & Bussolo, Maurizio, 2007. "Remittances and the real exchange rate," Policy Research Working Paper Series 4213, The World Bank.
    18. Richard C. Marston, 1987. "Exchange Rate Policy Reconsidered," NBER Working Papers 2310, National Bureau of Economic Research, Inc.
    19. Peltonen, Tuomas A. & Sager, Michael, 2009. "Productivity shocks and real exchange rate: a reappraisal," Working Paper Series 1046, European Central Bank.
    20. Esa Mangeloja, 2004. "Interrelationship of economic growth and regional religious properties," ERSA conference papers ersa04p94, European Regional Science Association.
    21. Hwang, Chiun-Lin, 1989. "Optimal monetary policy in an open macroeconomic model with rational expectation," ISU General Staff Papers 1989010108000010197, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1992-006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anna Oates (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.