Sectoral Employment, Wages and The Exchange Rate: Evidence From The U.S.

The literature on the impact of devaluation on domestic production includes many studies that have used aggregate output data such as real GDP. A few recent studies have began looking at the response of sectoral output to currency depreciation. In this paper we consider eight sectors of the U.S. economy and investigate the production, nominal wages and the real wages of each sector to depreciation of the dollar using a new cointegration technique that does not require testing for unit roots. The main conclusion of the paper is that while depreciation of the dollar has short-run impact on all three variables, it has no long-run effects in most sectors.