Jim, the exchange rate certainly helps to hold inflation in check, but I am not
sure how much it encourages imports. Are we on the same page?
Jim Devine wrote:
> At 07:18 PM 9/27/00 -0700, you wrote:
> >Jim, how important is the exchange rate for imports? I suspect that it is
> >a major influence on exports since U.S. goods compete directly with those
> >from other similar countries. We have our largest trade imbalance with
> >China. Chinese wages are so low that an increase in the relative costs
> >would hardly be enough to displace imports. It could cause production to
> >flee China for an even lower cost region, but I wonder how much U.S.
> >imports would be changed.
>
> My point was that the high dollar exchange rate encourages low dollar
> prices of imported goods, including raw materials, helping to avoid
> inflation in the US. To me, the extent to which the high dollar is
> encouraging US imports or is hurting US exports is secondary. Either way,
> the high dollar is a major factor helping to explain the US trade deficit
> and the US current account deficit.
>
> Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
