I think that’s certainly a possibility. When I think about what the import-price response to an exchange rate change is going to be, I think of the producer who is doing the exporting looking at his own costs and his margins over those costs. Based on that and the ...

May I just add one point? I fully agree, but in addition to the exchange rate policies in greater Asia, there’s the question of whether demand management there can ultimately help push toward the benign outcome. If we get increased openness and thus greater consumption of U.S. goods ...

It’s about 25 percent in the Board’s simulation model. So we have a different sensitivity of import prices to exchange rate changes, and that has a number of effects in terms of what you see here in our materials. Looking at exhibit 5 in Karen’s and Joe ...

We do have a disagreement on what we think the pass-through is. I’m guessing that, in the end, there won’t be as much disagreement about that going forward as it might appear. Let me go through what the difference is. When I talk about pass-through of exchange rates ...

Well, if the dollar depreciation is part of the larger switch of investor sentiment, for example, out of asset holdings in the United States, we’d have higher interest rates and lower investment spending. In terms of the overall GDP effect, that is offset to a large degree in the ...

Right.

Yes. These numbers are, I believe, for 2002.

Yes.

What I’ve done is a bit more limited in that I’ve looked historically at the effects of exchange rate movements on profitability and the net effects in terms of the first two bars, which are the revenue exposures versus their cost exposures. And I’ve found that those ...

Governor Gramlich, may I add that I agree with the outcomes of the scenarios, but there is also a lot of redistribution across industries going on in the background here. There’s a shift from capital goods sectors toward export-oriented sectors and the ones that were competing with imports. I ...

Right.

Let me start by mentioning the response of profits to exchange rate changes. First, at the industry level, if we use an aggregate trade-weighted exchange rate to look for the effects of exchange rates on profits of U.S. industries, we don’t see anything that is statistically significant. If ...

I will be referring to the separate package of exhibits that you should also have in front of you. My portion of this briefing on U.S. external adjustment focuses on the exchange rate and trade exposure of U.S. industries. Some scenarios for closing the U.S. trade deficit ...