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The path of the dollar has significantly influenced investment activity in U.S. industry. The effects of both exchange rate levels and exchange rate volatility have been more pronounced in the 1980s than in the 1970s. Although aggregate investment data mask some of these relationships, the effects of exchange rates on investment are most pronounced in the disaggregated data for manufacturing durable goods sectors and nonmanufacturing sectors. These relationships also have changed over time. In contrast to the conventional wisdom, in the 1980s real dollar depreciations (appreciations) were likely to be associated with investment contractions (expansions).