Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229545
Authors: 
Ma, Sai
Schmidt-Eisenlohr, Tim
Zhang, Shaojun
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8727
Abstract: 
This paper establishes a causal link between the dollar exchange rate and international trade flows, employing a new instrument for the U.S. Dollar that is based on domestic U.S. housing activity (Ma and Zhang (2019)). In line with the dominant currency paradigm (Gopinath et al. (2020)), import prices and quantities respond strongly to a country’s exchange rate with the U.S. dollar. Once we instrument the dollar, we find evidence for perfect pass-through of the dollar exchange rate to import prices. A dollar appreciation of 1 percent lowers import quantities by 1.5 percent for countries that fully invoice in dollars.
Subjects: 
dominant currency
dollar invoicing
international trade
JEL: 
F14
F31
G15
Document Type: 
Working Paper

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