Although large changes in real exchange rates have occurred during the past decades, the real implications of these movements remain an empirical question. Using detailed data from the United States, Canada, the United Kingdom, and Japan, we examine the implications of exchange rates for time series of sectoral investment. Both theoretically and empirically we show that investment responsiveness to exchange rates varies over time, positively in relation to sectoral reliance on export share and negatively with respect to imported inputs into production. Important differences exist in investment endogeneity across high and low markup sectors, with investment in low markup sectors significantly more responsive to exchange rates. Cross-country differences in investment response are only partially explained by industrial organization arguments.