Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Many investors believe that a decline in the value of the U.
A falling dollar diminishes its purchasing power internationally, and that eventually translates to the consumer level. For example, a weak dollar increases the cost to import oil, causing oil prices to rise. This means a dollar buys less gas and that pinches many consumers. While that scenario is unfortunate, investors can have their revenge, so to speak, by investing in the stocks of U.
As more emerging markets acquire a taste for American products, these companies will send more products across the globe, boosting their bottom lines and, perhaps, shareholder returns. So how do these multinational companies benefit when the dollar falls? Let's say a U. The company's profits from Europe will be denominated in euros and when those euros are converted against a weak dollar, there are more dollars for the American company and a nice jolt to the bottom line.
Better profit margins usually translate to better results for shareholders. Two of the best examples of U. Treasury Secretary clarifies his position on dollar. Associated Press Worldstream , March 5. Bach, Christopher. April, pp. Blecker, Robert A. Trade Deficit Review Commission.
Washington, D. The ticking debt bomb: why the U. Briefing Paper. Blustein, Paul. Washington Post , May 9. Washington Post , May Bosworth, Barry P. Saving and Investment in a Global Economy. Campa, Jose, and Linda S. Investment in manufacturing, exchange rates and external exposure. Journal of International Economics. Report on the G exchange markets can be managed!
International Economic Insights. Chirinko, Robert S. Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications. Journal of Economic Literature. Davidson, Paul. Blecker, ed. Economic Policy Institute Series. Armonk, N.
Sharpe, Inc. Dominguez, Kathryn M. Fred Bergsten and John Williamson, eds. Does foreign-exchange intervention matter? The portfolio effect. American Economic Review. Fazzari, Steven M. Dymski, Gerald Epstein, and Robert Pollin, eds. Financial System: Equity and Efficiency for the 21st Century.
Glenn Hubbard, and Bruce C. Goldberg, Linda S. Exchange rates and investment in United States industry. Review of Economics and Statistics. Grieve Smith, John. London: Anthem Press. Hill, Patrice. Snow tries to halt his damage to greenback; backs strong U. Washington Times , March 6. Morici, Peter. Preeg, Ernest H. Swann, Christopher. Census Bureau. Release of July 31, Table 6. Weller, Christian E.
Williamson, John, ed. Estimating Equilibrium Exchange Rates. Worthington, Paula R. Federal Reserve Bank of Chicago. See related work on Economic Growth. See more work by Robert A. Specifically, the overvalued dollar has resulted in: About , lost jobs in the manufacturing sector by —more than one-quarter of the 2. Other important U. The dollar has continued to rise relative to these other currencies , which belong to countries that now account for nearly half of total U.
Causes of the overvalued dollar The U. As a prominent trade economist wrote, In the s, the Japanese, the Chinese, and other governments have dramatically increased their purchases of U. Job losses caused by dollar overvaluation Slower export growth combined with accelerated import growth implied that foreign trade had a negative net effect on U.
Manufacturing profits squeezed by the high dollar By weakening U. In spite of the losses experienced by workers and firms alike in U. Investment by domestic manufacturing firms was also reduced by the high dollar In addition to its negative impact on domestic employment and profitability, the overvalued dollar also hurt the domestic manufacturing sector by decreasing investment in new plants, equipment, and software i. Conclusions and policy recommendations It is clear that the high value of the dollar has hurt employment, profits, and investment in the U.
Influencing market psychology Given the importance of market psychology in determining the value of any financial asset, including a currency such as the U. Currency market intervention and policy coordination Direct intervention in currency marketsi. Stabilizing exchange rates at realistic levels Supporters of the strong dollar have raised concerns about the risks of lowering its value, including the potential harm to U. Appendix This Appendix presents the econometric estimates of the effects of the increased value of the U.
The profit share The most successful way of estimating the manufacturing profit share equation was with the data measured in levels and including a lagged dependent variable to represent a partial adjustment process.
Investment For the investment rate i. Data definitions and sources This section gives the exact definitions and sources for the data series used in the preceding statistical analysis. Endnotes 1. See the evidence cited in Blecker b. See endnote 13 above. See the Appendix for details on these estimates. See the Appendix for the econometric analysis underlying this estimate. See, for example, Fazzari , Bosworth , and Chirinko The real interes t rate, by any of these measures, was also insignificant when the dollar index was included in the equation.
References Agence France Press. Hagenbaugh, Barbara. Snow comment trips up dollar. USA Today , March 6. Williamson, John, and Marcus H. Search for:. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. By Ken Little Full Bio LinkedIn Twitter Ken Little has more than two decades of experience writing about personal finance, investing, the stock market, and general business topics.
He has written and published 15 books specifically about investing and the stock market, many of which are part of the well-known franchise, The Complete Idiot's Guides. As a freelance writer and consultant, Ken focuses on stocks , trading basics, investment strategy, and health care.
Learn about our editorial policies. Reviewed by Anthony Battle. Article Reviewed June 30, Learn about our Financial Review Board. Key Takeaways A strong dollar makes imported products such as cars and electronics more affordable. Federal Reserve. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile.
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