A strong dollar is contractionary for the global economy

Otaviano Canuto

No 2236, Policy briefs on Economic Trends and Policies from Policy Center for the New South

Abstract: The US dollar has risen dramatically in value against other currencies recently. Three channels through which factors affecting bilateral exchange rates operate have been pulling up the U.S. dollar: yield differentials, liquidity differentials, and growth differentials. The strong appreciation of the US dollar against other currencies recently reinforced the contractionary pressures present in the global economy. Ultimately, the “turn” or “pivot” of the dollar will most likely occur when a “turn” or “pivot” occurs in US monetary policy, given the latter’s critical weight on the determination of growth and yield differentials.

Date: 2022-11
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Persistent link: https://EconPapers.repec.org/RePEc:ocp:pbecon:pb_67-22

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