Since their introduction in 1982, Japanese auto transplants in the U.S. have skyrocketed in production, now producing many more cars than are imported. This study incorporates new refinements and revisions to attempt to identify the main factors that are responsiblefor the introduction of Japanese auto transplants and their massive growth in production over the last 14 years. The author develops two hypotheses from theoretical analysis ofthe factors contributing to production decisions. The first is that the voluntary export restraints (VERs) imposed on the Japanese from 1981-1985 are responsible for bringing the transplants to the U.S. andfor creating major growth in their production. The second hypothesis is that after 1985, a different factor was responsible for sustaining growth in transplant production, the exchange rate. The author relies mainly on theory and observations of quarterly time series data to support his first hypothesis, but supports the second hypothesis with both theoretical and improved empirical analyses, with strong results throughout.



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