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Title: |
The Effect of Exchange Rates on Prices, Wages, and Profits: A Case Study of the United Kingdom in the 1990's. |
| Author: |
Gagnon, Joseph E. |
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Affiliation: |
Board of Governors of the Federal Reserve System, Washington, DC, USA |
| Source: |
International Economic Journal, June 2006, v. 20, no. 2, pp. 149-160 |
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Publication Date: |
June 2006 |
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Abstract: |
During the 1990's the United Kingdom experienced large and sudden exchange rate movements that had no apparent impact on overall consumer prices. This papers shows that the stability of UK consumer prices was made possible in part by offsetting movements in the price-cost margins of foreign exporters and in part by offsetting price-cost margins in the UK distribution sector. At the same time, UK manufacturers experienced margin swings in the opposite direction, largely due to their role as exporters. Thus, sterling depreciation boosted the profits of UK manufacturers and squeezed the profits of UK distributors, while sterling appreciation had the opposite effects. |
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