Journal Article

Money, manufacturing, and the strong dollar

Abstract: U.S. firms are facing tough international competition, and the U.S. trade deficit has grown to a level that some find alarming. Why doesn't the United States respond by easing monetary policy to lower the dollar's exchange rate and reduce the price of U.S. goods in foreign markets? This Commentary argues that monetary policy is incapable of improving the competitive position of U.S. manufacturing through exchange rate manipulation. The temporary gains monetary easing might achieve through a nominal dollar depreciation would be offset by higher inflation and decreased foreign investment.

Keywords: Monetary policy; Manufactures; Foreign exchange rates;


Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2001

Issue: Jul

Order Number: 1