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Will a Weaker Dollar Mean a Stronger Economy?

This paper focuses on some fundamentals of economic analysis and the empirical record that have been extensively ignored in discussions of exchange rates and U.S. trade in the 1980s.It addresses both the issue of why an appreciation of the dollar was associated with the relatively strong performance of the U.S. economy in the first half of the decade, and why the subsequent depreciation could be associated with a reduction in U.S. real income growth.