TY  - JOUR
AU  - Goldberg,Linda S.
AU  - Tille,Cédric
TI  - The International Role of the Dollar and Trade Balance Adjustment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12495
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12495
L1  - http://www.nber.org/papers/w12495.pdf
N1  - Author contact info:
Linda S. Goldberg
Research Department, 3rd Floor
Federal Reserve Bank-New York
33 Liberty Street
New York, NY 10045
Tel: 212/720-2836
Fax: 212/720-6831
E-Mail: linda.goldberg@ny.frb.org

Cédric Tille
Graduate Institute for International
  and Development Studies
Department of Economics
University of Geneva
Pavillon Rigot, Avenue de la Paix 11 A
1202 Geneve, Switzerland
Tel: 41229085928
Fax: 41227333049
E-Mail: cedric.tille@graduateinstitute.ch
AB  - 
The pattern of international trade adjustment is affected by the continuing international role of the dollar and related evidence on exchange rate pass-through into prices. This paper argues that a depreciation of the dollar would have asymmetric effects on flows between the United States and its trading partners. With low exchange rate pass-through to U.S. import prices and high exchange rate pass-through to the local prices of countries consuming U.S. exports, the effect of dollar depreciation on real trade flows is dominated by an adjustment in U.S. export quantities, which increase as U.S. goods become cheaper in the rest of the world. Real U.S. imports are affected less because U.S. prices are more insulated from exchange rate movements — pass-through is low and dollar invoicing is high. In relation to prices, the effects on the U.S. terms of trade are limited: U.S. exporters earn the same amount of dollars for each unit shipped abroad, and U.S. consumers do not encounter more expensive imports. Movements in dollar exchange rates also affect the international trade transactions of countries invoicing some of their trade in dollars, even when these countries are not transacting directly with the United States.
ER  -