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Dominant Currencies and External Adjustment

Gustavo Adler, Camila Casas, Luis Cubeddu, Gita Gopinath, Nan Li, Sergii Meleshchuk, Carolina Osorio Buitron, Damien Puy () and Yannick Timmer

No 2020/005, IMF Staff Discussion Notes from International Monetary Fund

Abstract: 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.

Keywords: SDN; currency pricing; financing currency; Colombian peso; currency financing; expenditure switching; invoicing data; invoicing currency; Currencies; Exchange rates; Exports; Depreciation; Imports; Global; trade pricing; trade invoicing; exchange rate; external adjustment (search for similar items in EconPapers)
Pages: 46
Date: 2020-07-20
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-opm
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Handle: RePEc:imf:imfsdn:2020/005