Falling exchange rates reduce the purchasing power of the dollar, increasing import prices. Higher import prices have two effects. (1) A substitution effect that shifts demand from imported to domestically produced goods. (2) An income effect that reduces the total amount of real income...

Rising exchange rates can lower prices on imported consumer goods. The lower prices have two effects. A substitution effect shifts in demand from domestically produced goods to imports. An income effect also allows more import purchases. It also allows some income previously spent on imports to...

Do interest rates effect investment and the GDP? If so, which ones, and by how much? Research on this topic over 5 decades has produced conflicting results. Yet, this question is of critical importance to the viability of Keynesian macroeconomics. This paper attempts to explain why results have...

This paper examines the extent to which changes in imports or exports of U.S. consumer goods and services occurs in response to a change in the exchange rate, 1960 -2000. The data used are taken from the Economic Report of the President, 2002. The findings indicate that an increase in the trade...

Falling exchange rates reduce the purchasing power of the dollar, increasing import prices. Higher import prices have two effects. (1) A substitution effect that shifts demand from imported to domestically produced goods. (2) An income effect that reduces the total amount of real income...

Heim (2010) found a strong negative relationship between deficits and private consumer and investment spending, controlling for other key variables. The study did not directly test the mechanism by which deficits were related to consumer and investment spending, only the result. Crowd out theory...

The crowd out effects of the government deficit is tested by adding it to consumption and investment models which control extensively for other factors. Effects are calculated for recession and non-recession periods, and compared to models with average crowd out, and models without crowd out....

The crowd out effects of government deficits are tested by adding deficit variables to consumption and investment models which extensively control for other factors. Separate variables are added for deficits resulting from tax cuts and spending increases. Effects are calculated for recession and...

This paper econometrically tests whether deficits financed by government borrowing “crowd out” business and consumer spending reductions by reducing credit availability. To test the hypothesis, the government deficit variables are added to consumption and investment models to see if they...

Using a simplified Klein/Fair structural model of the U.S. economy, estimated using 1960 – 2000 data, the paper finds that the 12.9% dollar decline 2000-2009 had a positive effect on exports, but mildly negative effects for domestically produced investment and consumer goods. It is shown that...