Exchange rate effects on the relationship between FDI and trade in the US food processing industry

The purpose of this study is to test for the effects of the real exchange rate and its volatility on exports, outward FDI, and foreign affiliate sales by the U.S. food-processing industry. The relevant question is whether the appreciation (depreciation) of the U.S. dollar and its volatility has contributed to the observed relationship between FDI and trade in this industry. Besides underscoring the importance of the level and stability of exchange rates for trade and foreign investment, this research has implications for policy, since expanding trade and/or foreign investment can bring about changes in the distribution of income to those engaged in food processing in the United States.