I guess that I fixed on your term "mechanical". There will be some effect, but ..
There are a number of studies like this: Goldberg, Pinelopi Koujianou and Michael M. Knetter. 1997. "Goods Prices and Exchange Rates: What Have We Learned?" Journal of Economic Literature, 35: 3 (September): pp. 1243-72. 1243: In January 5, 1994, the dollar was worth 113 yen, while by April 19, 1995, it was worth only 80 yen. This represented a 34 percent appreciation of the yen against the dollar. Industrial production per manufacturing employee in Japan and the U.S. grew by 9 percent and 5 percent, respectively, while manufacturing wages grew by 4.1 percent in Japan and 2.5 percent in the U.S. Thus labor costs fell by about 30 percent in the U.S. relative to Japan during this period. 1243-4: One might expect tremendous substitution of U.S. for Japanese labor in manufacturing, but seasonally adjusted measures of industrial production grew by 6 percent in Japan compared to only 5 percent in the United States over the five-quarter period of the currency swing. 1244: Foreign buyers of Japanese products did not experience substantial price increases, in spite of the sharp increase in Japanese labor costs. For example, in 1994, a Toyota Celica ST Coupe made in Japan sold in the U.S. at $16,968. In 1995, the same the Celica cost $17,285, a price increase of less than 2 percent. 1244: They refer to destination-specific changes in markups on exports. On Mon, Nov 22, 2004 at 05:39:43PM -0500, Doug Henwood wrote: > Michael Perelman wrote: > > >Not really. When the dollar last declined, Japanese manufacturers > >reduced margins & > >even absorbed losses to maintain their beachhead here. > > Yes really. When the dollar declined in 1986 and 1987, inflation rose > from below 2% to above 4%. Based on the historical record, we can > expect a rise of about 1.1% in the inflation rate over the next year > or so. > > Doug -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
