Dominant Currency Paradigm: A New Model for Small Open Economies - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Dominant Currency Paradigm: A New Model for Small Open Economies write by Camila Casas. This book was released on 2017-11-22. Dominant Currency Paradigm: A New Model for Small Open Economies available in PDF, EPUB and Kindle. 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
Dominant Currency Paradigm - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Dominant Currency Paradigm write by Camila Casas. This book was released on 2016. Dominant Currency Paradigm available in PDF, EPUB and Kindle. 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: A New Model for Small Open Economies
Dominant Currency Paradigm: A New Model for Small Open Economies - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Dominant Currency Paradigm: A New Model for Small Open Economies write by Camila Casas. This book was released on 2017-11-22. Dominant Currency Paradigm: A New Model for Small Open Economies available in PDF, EPUB and Kindle. 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.
Global Trade and the Dollar
Global Trade and the Dollar - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Global Trade and the Dollar write by Ms.Emine Boz. This book was released on 2017-11-13. Global Trade and the Dollar available in PDF, EPUB and Kindle. 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 Currencies and External Adjustment
Dominant Currencies and External Adjustment - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Dominant Currencies and External Adjustment write by Gustavo Adler. This book was released on 2020-07-20. Dominant Currencies and External Adjustment available in PDF, EPUB and Kindle. The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency financing) has come to the forefront of policy debate, raising questions about how exchange rates work and the benefits of exchange rate flexibility. This Staff Discussion Note documents these features of international trade and finance and explores their implications for how exchange rates can help external rebalancing and buffer macroeconomic shocks.
