An important puzzle in international macroeconomics is the exchange rate disconnect puzzle. Nominal exchange rates seem to be unrelated to other macroeconomic variables, for example, export quantities. This paper uses Japanese firm level data to examine whether exchange rate fluctuations are...

In this paper, we focus on the movements of the yen on Japanese industries, and on the sectoral reallocation of Japanese employment. We show that the appreciation episodes of 1985 and 1995 have significantly hurt the ability of Japanese industries to compete with U.S. industries, by raising the...