From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Thu May 20 2004 - 03:39:46 EDT
The profit surge also coincides with the post 2002 depreciation of the dollar, almost 30% against the euro though only 12% against a trade weighted basket of currencies (Bernacke, 1/04). Dollar depreciation not only aids international competitiveness of firms, especially ones that are not transnational corporations; it also increases the dollar value of profits in foreign operations. But given the J (?) effect of currency depreciation, perhaps the surge in profitability follows too quickly the fall of the dollar to have been caused by it. In terms of Paul's variables, what has created pricing power? Is it an effect of the spate of mergers and acquisitions in the late 90s? Hasn't the decrease in unit labor costs had less to do with the assimilation of productivity increasing technology than with the lay offs of workers who would have otherwise been carried through a recession? Rakesh
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