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Why Have Corporate Profits Declined? An International Comparison
Author(s) -
Uctum Merih
Publication year - 1998
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00100
Subject(s) - economics , currency , production (economics) , monetary economics , unit (ring theory) , international economics , microeconomics , mathematics education , mathematics
The paper compares the trends and determinants of US profits with those of Japan, Germany, and Canada in a model of pricing‐to‐market in the export and domestic markets. It is found that during the 1970s increasing unit production costs lowered profits in all countries. After 1980, cost factors still affected profits except in the USA where lower real import prices depressed profits. It is shown that a currency appreciation hurts US profits three times more than Japanese profits via the imported inputs channel. This finding may explain why an overvalued currency is sustainable for a longer period in Japan than in the USA.