Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279245 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10495
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper provides evidence that the U.S. dollar affects countries' exports through the financial channel of the exchange rate (Bruno and Shin (2015)). Using global data on trade between countries whose currency is not the U.S. dollar, it documents a positive relationship between the dollar and import prices. Importantly, this effect is stronger when the dollar share of the exporter's foreign borrowing is larger. Results strengthen substantially when instrumenting the dollar by U.S. domestic housing activity. Then, a dollar appreciation increases import prices and decreases import quantities, with effects being proportional to the source country's foreign dollar borrowing share.
Subjects: 
dollar
dominant currency
financial channel
international trade
JEL: 
F14
F31
G15
Document Type: 
Working Paper
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