Measuring the Effects of Exchange Rate Changes on Investment in Australian Manufacturing Industry

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Title Measuring the Effects of Exchange Rate Changes on Investment in Australian Manufacturing Industry
Author Swift, Robyn Frances
Journal Name The Economic Record
Editor Professor Paul Miller
Year Published 2006
Place of publication Carlton ,Victoria
Publisher Blackwell Publishing Asia
Abstract This paper uses an empirical framework derived from an optimising adjustment-cost model of investment to examine the relationship between exchange rates and investment in Australian manufacturing industry between 1988 and 2001. The results show that the response of investment to exchange rate changes varies with the external exposure of industry, positively with export share of sales and negatively with the share of imported inputs into production. Industry competitive structure, represented by markup of price over cost, interacts with external exposure so that lower levels of markup increase the responsiveness of investment to exchange rate changes. For Australian manufacturing industry, a 10% real appreciation of the Australian dollar (AUD) leads to an average 8.0% decrease in total investment through the export share channel over the period, and an average 3.8% increase in total investment through the imported input share channel, with most of the response occurring through investment in Equipment, Plant and Machinery.
Peer Reviewed Yes
Published Yes
Publisher URI http://www.blackwellpublishing.com/
Alternative URI http://www.blackwell-synergy.com/doi/abs/10.1111/j.1475-4932.2006.00329.x
Copyright Statement Copyright 2006 Blackwell Publishing. This is the author-manuscript version of the paper. Reproduced in accordance with the copyright policy of the publisher. The definitive version is available at www.blackwell-synergy.com
Volume 82
Issue Number S1
Page from S19
Page to S25
ISSN 0013-0249
Date Accessioned 2007-02-08
Date Available 2008-02-20T06:51:20Z
Language en_AU
Faculty Griffith Business School
Subject Industry Economics and Industrial Organisation; International Economics and International Finance; Macroeconomics (incl. Monetary and Fiscal Theory)
URI http://hdl.handle.net/10072/16651
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1a

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