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New tool gauges impact of exchange rates on states

Author

Listed:
  • Steve Brzezinski
  • Barbara Davalos
  • Keith R. Phillips

Abstract

States with relatively more employment tied to international trade are increasingly likely to be sensitive to exchange rate movements, and face sharply different effective exchange rate shifts, often provoked by economic or financial crises. ; Analysts need a tool to more effectively gauge the sometimes varied impact of exchange rate movements on states. In this article, we introduce a measure that compares the value of the dollar against the currencies of countries with which each of the 50 states trade--the real trade-weighted value of the dollar (RTWVD) index. ; To assess the impact of exchange rates on states, the RTWVD weights the U.S. dollar exchange rate with various countries based on a state's share of exports. It is a \\"real\\" measure because it adjusts the exchange rate for different rates of inflation. The index will allow analysts to more precisely identify the exchange rates that most affect a state's economy.

Suggested Citation

  • Steve Brzezinski & Barbara Davalos & Keith R. Phillips, 2010. "New tool gauges impact of exchange rates on states," Southwest Economy, Federal Reserve Bank of Dallas, issue Q4, pages 3-7.
  • Handle: RePEc:fip:feddse:y:2010:i:q4:p:3-7:n:4
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    File URL: http://www.dallasfed.org/assets/documents/research/swe/2010/swe1004b.pdf
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