THE EFFECTS OF EXCHANGE-RATE AND RELATION PRODUCTIVITY CHANGES ON UNITED-STATES INDUSTRIAL OUTPUT AT THE STATE-LEVEL

This paper considers the effects of a changing dollar on aggregate state output, and for the agricultural, manufacturing and all other (aggregate state output less agricultural and manufacturing) sectors for the contiguous 48 US states during the period 1972-89. After controlling for productivity differentials between the US and its major trading partners, the findings indicate that in the long run, states have more to fear from slow productivity growth than from fluctuations in the dollar. Holding differences between foreign and US productivity constant, real exchange rate movements have had small effects on most states' output growth (total and by sector). More important have been changes in foreign productivity growth relative to domestic productivity growth.