Industry-Specific Exchange Rates for the United States
Federal Reserve Bank of New York Economic Policy Review, Vol. 10, No. 1, May 2004
16 Pages Posted: 28 Sep 2004
The trade-weighted exchange rates constructed for the aggregate U.S. economy do not always capture the changes in industry competitive conditions induced by movements in specific bilateral exchange rates. Exchange rates produced using information on industry-specific trade partners are often better suited for this task. This article constructs three industry-specific real exchange rate measures for the United States-one using export partner weights only, a second using import partner weights, and a third using an average of export and import weights by industry - and examines how they co-move or diverge from the aggregate economywide measures. The exercise suggests that researchers who use aggregate exchange rate indexes rather than industry-specific measures might overlook the empirical value of exchange rates for the producer profits of specific U.S. industries.
Keywords: exchange rate, dollar, industry, competition, import, prices
JEL Classification: F3, F4
Suggested Citation: Suggested Citation