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- W3125408083 abstract "This article systematically examines the importance of exchange rate movements and industry competition for stock returns. Common shocks to industries across countries are more important than competitive shocks due to changes in exchange rates. Weekly exchange rate shocks explain almost nothing of the relative performance of industries. Using returns measured over longer horizons, the importance of exchange rate shocks increases slightly and the importance of industry common shocks increases more substantially. Both industry and exchange rate shocks are more important for industries that produce internationally traded goods, but the importance of these shocks is economically small for these industries as well. Economists, journalists, and politicians around the world argue that some of the industries in their country compete vigorously with the same industries in other countries and that exchange rate shocks affect their competitiveness. In the United States it is routinely stated that some U.S. industries compete with Japanese industries and that a depreciation of the yen is bad for these U.S. industries and good for the rival Japanese industries: “If the yen falls, trade tensions could intensify between the U.S. and Japan as autos and machinery from Japan gain a competitive edge.” 1 Further, the exchange rate literature shows that exchange rate shocks lead to persistent deviations from purchasing power parity. 2 Froot and Klemperer (1989) and Knetter (1989, 1993), among others, demonstrate that deviations from purchasing power parity lead to sharp changes in price markups and profit margins for exporters." @default.
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- W3125408083 date "1997-10-01" @default.
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- W3125408083 title "International Competition and Exchange Rate Shocks: A Cross-Country Industry Analysis of Stock Returns" @default.
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- W3125408083 doi "https://doi.org/10.3386/w6243" @default.
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