Dominant Currency Paradigm
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Dominant Currency Paradigm A New Model For Small Open Economies
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Author : Camila Casas
language : en
Publisher: International Monetary Fund
Release Date : 2017-11-22
Dominant Currency Paradigm A New Model For Small Open Economies written by Camila Casas and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-22 with Business & Economics categories.
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Dominant Currency Paradigm
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Author : Camila Casas
language : en
Publisher:
Release Date : 2016
Dominant Currency Paradigm written by Camila Casas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Exchange rate pass-through categories.
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer's currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) terms of trade are stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports and export expansions following depreciations are weak. Using merged firm level and customs data from Colombia we document strong support for the dominant currency paradigm and reject the alternatives of producer currency and local currency pricing.
Dominant Currency Paradigm
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Author : Gita Gopinath
language : en
Publisher:
Release Date : 2021
Dominant Currency Paradigm written by Gita Gopinath and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Exchange rate pass-through categories.
A handful of currencies, especially the US dollar, play a dominant role in international trade. We survey the active theoretical and empirical literature that documents patterns of currency use in global trade, the implications of dominant currencies for international transmission of shocks, exchange rate pass-through, expenditure switching, and optimal monetary policy. We describe advances in the endogenous currency choice literature including conditions for the emergence and persistence of dominant currency equilibria.
Global Trade And The Dollar
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Author : Ms.Emine Boz
language : en
Publisher: International Monetary Fund
Release Date : 2017-11-13
Global Trade And The Dollar written by Ms.Emine Boz and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-13 with Business & Economics categories.
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 percent U.S. dollar appreciation against all other currencies in the world predicts a 0.6–0.8 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. 4) Using a novel Bayesian semiparametric hierarchical panel data model, we estimate that the importing country’s share of imports invoiced in dollars explains 15 percent of the variance of dollar pass-through/elasticity across country pairs. Our findings strongly support the dominant currency paradigm as opposed to the traditional Mundell-Fleming pricing paradigms.
Dominant Currency Paradigm
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Author : Tamta Sopromadze
language : en
Publisher:
Release Date : 2021
Dominant Currency Paradigm written by Tamta Sopromadze and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Global Trade And The Dollar
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Author : Gita Gopinath
language : en
Publisher:
Release Date : 2018
Global Trade And The Dollar written by Gita Gopinath and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
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 percent U.S. dollar appreciation against all other currencies in the world predicts a 0.6-0.8 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. 4) Using a novel Bayesian semiparametric hierarchical panel data model, we estimate that the importing country's share of imports invoiced in dollars explains 15 percent of the variance of dollar pass-through/elasticity across country pairs. Our findings strongly support the dominant currency paradigm as opposed to the traditional Mundell-Fleming pricing paradigms.
Dominant Currency Pricing And The Global Output Spillovers From Us Dollar Appreciation
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Author : Georgios Georgiadis
language : en
Publisher:
Release Date : 2019
Dominant Currency Pricing And The Global Output Spillovers From Us Dollar Appreciation written by Georgios Georgiadis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Different export-pricing currency paradigms have different implications for a host of issues that are critical for policymakers such as business cycle co-movement, optimal monetary policy, optimum currency areas and international monetary policy co-ordination. Unfortunately, the literature has not reached a consensus on which pricing paradigm best describes the data. Against this background, we test for the empirical relevance of dominant-currency pricing (DCP). Specifically, we first set up a structural three-country New Keynesian dynamic stochastic general equilibrium model which nests DCP, producer-currency pricing (PCP) and local-currency pricing (LCP). In the model, under DCP the output spillovers from shocks that appreciate the US dollar multilaterally decline with an economy's export-import US dollar pricing share differential, i.e. the difference between the share of an economy's exports and imports that are priced in the dominant currency. Underlying this prediction is a change in an economy's net exports in response to multilateral changes in the US dollar exchange rate that arises because of differences in the extent to which exports and imports are priced in the dominant currency. We then confront this prediction of DCP with the data in a sample of up to 46 advanced and emerging market economies for the time period from 1995 to 2018. Specifically, controlling for other cross-border transmission channels, we document that consistent with the prediction from DCP the output spillovers from US dollar appreciation correlate negatively with recipient economies' export-import US dollar invoicing share differentials. We document that these findings are robust to considering US demand, US monetary policy and exogenous exchange rate shocks as a trigger of US dollar appreciation, as well as to accounting for the role of commodity trade in US dollar invoicing.
From Dominant To Producer Currency Pricing Dynamics Of Chilean Exports
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Author : Jose De Gregorio
language : en
Publisher:
Release Date : 2023
From Dominant To Producer Currency Pricing Dynamics Of Chilean Exports written by Jose De Gregorio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
The Dedollarisation Paradigm
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Author : Jarrel E
language : en
Publisher: Independently Published
Release Date : 2023-09-07
The Dedollarisation Paradigm written by Jarrel E and has been published by Independently Published this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-09-07 with categories.
The Dedollarisation Paradigm: Rethinking Global Financial Systems In an age of profound economic transformation, the world is witnessing a fundamental shift away from the once unassailable dominance of the United States dollar (USD) in global finance. The pages of history are being rewritten as nations, economies, and financial institutions grapple with the challenges and opportunities of dedollarisation. "The Dedollarisation Paradigm: Rethinking Global Financial Systems" offers an insightful and comprehensive exploration of this paradigm shift. In this groundbreaking book, we embark on a journey into the heart of the dedollarisation phenomenon. We delve deep into the complexities of a multipolar monetary system and examine its far-reaching implications for the global economy, trade, investment, and geopolitics. Through meticulous research, expert analysis, and real-world case studies, we unravel the intricacies of a world less dependent on the USD and the emergence of alternative reserve currencies. "The Dedollarisation Paradigm" takes readers on a compelling exploration of the history of the US dollar's rise to global prominence and its impact on international finance. It dissects the Bretton Woods System and dollar hegemony, laying bare the intricate web of financial power that has characterized the post-World War II era. But this book doesn't stop at history. It goes on to provide a forward-looking perspective, offering a roadmap for dedollarisation strategies and highlighting the benefits, challenges, and risks associated with this monumental shift. It explores the role of central banks in dedollarisation, the challenges of currency diversification, and the need for international cooperation in a multipolar world. Through in-depth analysis and thoughtful commentary, "The Dedollarisation Paradigm" equips readers with a nuanced understanding of the global financial system's future. It offers a glimpse into the potential scenarios that may unfold and their implications for global stability, trade relations, and economic equilibrium. Key Themes - Historical Perspective: The USD's journey from its inception to global dominance. - Bretton Woods System: How it shaped the dollar's hegemony. - Dedollarisation Strategies: Roadmaps for nations seeking to reduce USD dependence. - The Role of Central Banks: Their influence in the dedollarisation process. - Currency Diversification: Reducing risk through a multipolar monetary landscape. - Global Stability: Implications of dedollarisation on trade, finance, and geopolitics. "The Dedollarisation Paradigm: Rethinking Global Financial Systems" is an essential read for policymakers, economists, financial experts, and anyone seeking to comprehend the transformative forces at play in the global financial arena. With a wealth of information and a forward-thinking approach, this book shines a light on the evolving world of finance and the profound implications of dedollarisation on a global scale.
The Causal Effect Of The Dollar On Trade
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Author : Sai Ma
language : en
Publisher:
Release Date : 2022
The Causal Effect Of The Dollar On Trade written by Sai Ma and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
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. 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 passthrough of the dollar exchange rate to import prices that are invoiced in dollars. A dollar appreciation of 1 percent lowers import quantities by 1.5 percent for countries that fully invoice in dollars.