Wright, Lori

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University of New HampshireUniversity of New Hampshire Scholars' RepositoryMedia Relations Administrative Offices8-2-2005NH Exporter Competitiveness Sensitive ToExchange Rate Trends, According To Research ByUNH International Private Enterprise CenterLori WrightFollow this and additional works at: https://scholars.unh.edu/newsThis News Article is brought to you for free and open access by the Administrative Offices at University of New Hampshire Scholars' Repository. It hasbeen accepted for inclusion in Media Relations by an authorized administrator of University of New Hampshire Scholars' Repository. For moreinformation, please contact nicole.hentz@unh.edu.Recommended CitationWright, Lori, "NH Exporter Competitiveness Sensitive To Exchange Rate Trends, According To Research By UNH InternationalPrivate Enterprise Center" (2005). UNH Today. 1448.https://scholars.unh.edu/news/14489/29/17, 11(14 AMNH Exporter Competitiveness Sensitive To Exchange Rate Trends, According To Research By UNH International Private Enterprise CenterPage 1 of 2http://www.unh.edu/delete/news/news_releases/2005/august/lw_050802kaen.htmlRelated LinksWhittemore School ofBusiness andEconomicsNH Exporter Competitiveness Sensitive To Exchange RateTrends, According To Research By UNH InternationalPrivate Enterprise CenterContact: Lori Wright603-862-0574UNH Media RelationsAug. 2, 2005Editors: Fred Kaen is available to discuss the results of the report. He can be reached at603-862-3354 or frk@christa.unh.edu The full research report is available for download athttp://unhinfo.unh.edu/news/docs/exchange.pdf.DURHAM, N.H. – Changes in the value of the dollar can substantially affect the internationalcompetitiveness of New Hampshire exporters and the overall New Hampshire economy. Notonly do New Hampshire manufacturing exports support more than 20 percent of New Hampshiremanufacturing jobs, the jobs they support are in relatively high-paying industries such ascomputer and electronic products.These findings and more are discussed in a new research report, “Foreign Exchange RateExposures of New Hampshire Manufacturing Industries: Competitive Implications andManagerial Strategies,” published by the International Private Enterprise Center at the Universityof New Hampshire Whittemore School of Business and Economics. The paper will be presentedin October at the Northeast Business and Economics Association Conference in Rhode Island.“To track and evaluate how these changes affect New Hampshire manufacturing firms, theInternational Private Enterprise Center constructed two foreign exchange rate indexes based onthe destination of New Hampshire manufacturing exports -- New Hampshire Nominal ExchangeRate Index (NERI) and the New Hampshire Effective Exchange Rate Index (EERI),” accordingto Fred Kaen, co-director of the center and professor of finance.The NERI is a trade-weighted index that is calculated using actual (nominal) exchange rates.According to the research, from a base of 100 in 1999, the NERI rose from 100 to 109.22 or 9.22percent, reflecting the strengthening of the dollar in the foreign exchange markets. However,since 2001, the nominal dollar has weakened considerably and the NERI has fallen from 109.22to 94.47 or 13.5 percent. “This strengthening and weakening of the dollar is mirrored in changes in total New Hampshireexports. New Hampshire exports fell sharply in 2002, in part reflecting the strong dollar andbegan recovering in 2003and 2004 in part due to the weakening dollar,” according to Kaen.Since 2002, the currency competitive position of New Hampshire exporters has improved more9/29/17, 11(14 AMNH Exporter Competitiveness Sensitive To Exchange Rate Trends, According To Research By UNH International Private Enterprise CenterPage 2 of 2http://www.unh.edu/delete/news/news_releases/2005/august/lw_050802kaen.htmlthan that for the typical U.S. firm. “This improvement is particularly noticeable with respect toCanada, New Hampshire’s major trading partner, and with the European countries that haveadopted the Euro as their currency, New Hampshire’s second most important currency/trade areadestination,” Kaen said.New Hampshire exporters have not experienced much change in the nominal exchange ratesthey face in Asia. The New Hampshire Asian trade area index has moved within a narrow rangeof 99.94 to103.28 since 1999. However, exports to China have increased substantially and, as apercent of total exports, moved from 1.1 percent to 4.5 percent despite the fact that the Chinesehave kept their currency pegged to the dollar at a constant rate from 1999 until recently. “Given China’s recent decision to revalue its currency upward, the potential for further growth inNew Hampshire exports to China seems promising,” Kaen said.New Hampshire exporters have experienced a deterioration in their currency competitivenessrelative to Latin and South American countries. Nevertheless, exports to these destinations,especially Mexico, increased in 2004 after falling in 2002.The EERI is also a trade-weighted index but uses purchasing power parity exchange (PPP) ratesinstead of the actual exchange rates. PPP exchange rates are used to measure whether a country’scurrency is overvalued or undervalued in terms of what it can buy in foreign countries. An indexvalue of more than 100 means that the dollar is overvalued making New Hampshire exportsmore expensive in real terms than those of other countries. An index value of less than 100means that dollar is undervalued thereby enhancing the currency competitiveness of NewHampshire exports. In 1999, the EERI stood at 114.94, meaning that New Hampshire exporters faced an overallcurrency competitive disadvantage with respect to trading partners. The EERI climbed to a highof 120.04 in 2002. Since 2002, though, New Hampshire exporters have experienced a substantialimprovement in currency competitiveness, with the EERI actually below 100 at 98.17 in 2004. “In other words, in real terms, New Hampshire exports today are less expensive than they wouldhave been had purchasing power parity held in the foreign exchange markets,” Kaen said. “Infact, relative to 1999, New Hampshire exports have become considerably less expensive in realterms in all currencies except the Japanese yen. Currency-specific effective exchange rateindexes dropped from 100 in 1999 (after rising through 2001) to the mid-80s for Canada, theUnited Kingdom, Euro countries, Mexico and Australia. Thus, New Hampshire exporters shouldcontinue to see an improvement in their international competitive position through 2005.”

NH Exporter Competitiveness Sensitive To Exchange Rate Trends, According To Research By UNH International Private Enterprise Center

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NH Exporter Competitiveness Sensitive To Exchange Rate Trends, According To Research By UNH International Private Enterprise Center

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