Macroeconomic Interdependence and the International Role of the Dollar

Linda S. Goldberg () and Cédric Tille ()

No 13820, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The U.S. dollar holds a dominant place in the invoicing of international trade, along two complementary dimensions. First, most U.S. exports and imports invoiced in dollars. Second, trade flows that do not involve the United States are also substantially invoiced in dollars, an aspect that has received relatively little attention. Using a simple center-periphery model, we show that the second dimension magnifies the exposure of periphery countries to the center's monetary policy, even when direct trade flows between the center and the periphery are limited. When intra-periphery trade volumes are sensitive to the center's monetary policy, the model predicts substantial welfare gains from coordinated monetary policy. Our model also shows that even though exchange rate movements are not fully efficient, flexible exchange rates are a central component of optimal policy.

JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-int, nep-mac, nep-mon and nep-opm
Date: 2008-02
Note: IFM ITI ME
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w13820.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Macroeconomic interdependence and the international role of the dollar (2008)
Working Paper: Macroeconomic Interdependence and the International Role of the Dollar (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:13820

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13820
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().