Collateral damage: Dollar strength and emerging markets’ growth

Pablo Druck, Nicolas Magud and Rodrigo Mariscal

The North American Journal of Economics and Finance, 2018, vol. 43, issue C, 97-117

Abstract: We document a negative relation between the strength of the U.S. dollar and emerging markets’ growth: when the dollar is strong, emerging markets’ real GDP growth decreases—and vice versa. The main transmission channel is through (i) an income effect owing to the impact of the dollar on global commodity prices, and (ii) capital/production-inputs imports. As the dollar strengthens, dollar-commodity prices fall, depressing domestic demand growth via lower dollar income, thus reducing emerging markets’ growth. Domestic demand decelerates in countries relying on importing capital/inputs for domestic production, as their cost increases when their currencies weaken, despite any expansionary expenditure-switching effect.

Keywords: Dollar cycles; Emerging markets growth; Income vs. substitution effects (search for similar items in EconPapers)
JEL-codes: F31 F41 F44 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940817302188
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Collateral Damage: Dollar Strength and Emerging Markets’ Growth (2015)
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: https://EconPapers.repec.org/RePEc:eee:ecofin:v:43:y:2018:i:c:p:97-117

DOI: 10.1016/j.najef.2017.10.007

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().