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Why a dollar depreciation may not close the U.S. trade deficit

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Author Info

  • Linda Goldberg
  • Eleanor Wiske Dillon

Abstract

With the U.S. trade deficit at high levels, many look to a dollar depreciation to curb the U.S. appetite for foreign goods by pushing up the cost of imports. Yet three factors -- the use of the dollar in invoicing U.S. trade, the market share concerns of exporters, and sizable U.S. distribution costs -- could keep U.S. import prices from rising enough to reduce demand significantly. Evidence suggests that a weaker dollar will boost foreign demand for U.S. exports, but this adjustment by itself is unlikely to close the deficit.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Current Issues in Economics and Finance.

Volume (Year): 13 (2007)
Issue (Month): Jun ()
Pages:

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Handle: RePEc:fip:fednci:y:2007:i:jun:n:v.13no.5

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Keywords: Imports - Prices ; Dollar; American ; International finance ; International trade ; Balance of trade;

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Cited by:
  1. Linda Goldberg, 2011. "The international role of the dollar: Does it matter if this changes?," Staff Reports 522, Federal Reserve Bank of New York.
  2. Janet Ceglowski, 2012. "Has global competition changed US export pricing?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(1), pages 1-13, 01.

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