http://dx.doi.org/10.1080/00036846.2014.902026">
 

Document Type

Journal Article

Department/Unit

Department of Economics

Title

On investment and exchange-rate movements

Language

English

Abstract

We investigate the ways in which permanent exchange-rate changes may affect investment by influencing domestic and foreign revenue, the cost of imported variable inputs and the investment price of imported capital goods. We find that the revenue and investment-price channels have a quantitatively greater effect on investment than the cost channel. The negative effect of the revenue channel, which affects the marginal profitability of capital, outweighs the positive effect of the investment-price channel, which affects the marginal cost of capital, implying that exchange-rate appreciation has a net negative influence on investment. The estimation results are robust to different approaches to extracting the permanent components of exchange rates. © 2014 © 2014 Taylor & Francis.

Keywords

exchange rate, investment, machinery and equipment

Publication Date

2014

Source Publication Title

Applied Economics

Volume

46

Issue

19

Start Page

2301

End Page

2315

Publisher

Taylor & Francis

ISSN (print)

00036846

ISSN (electronic)

14664283

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