Department of Economics
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NBER Working Papers and Publications
|November 2017||Global Trade and the Dollar|
with Emine Boz, Gita Gopinath: w23988
We document that the U.S. dollar exchange rate drives global trade prices and volumes. Using a newly constructed data set of bilateral price and volume indices for more than 2,500 country pairs, we establish the following facts: 1) The dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions. U.S. monetary policy induced dollar fluctuations have high pass-through into bilateral import prices. 2) Bilateral non-commodities terms of trade are essentially uncorrelated with bilateral exchange rates. 3) The strength of the U.S. dollar is a key predictor of rest-of-world aggregate trade volume and consumer/producer price inflation. A 1% U.S. dollar appreciation against all other currencies in the world predicts a 0.6--0.8% de...
Published: Emine Boz & Gita Gopinath & Mikkel Plagborg-Møller, 2017. "Global Trade and the Dollar," IMF Working Papers, vol 17(239).