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How Far Has the Dollar Fallen?


  • Philippe Bacchetta
  • Martin Feldstein


The present paper introduces a new index of the real value of the dollar relative to 80 other currencies. The individual exchange rates are combined with weights that reflect the recent (1984) multilateral pattern of trade. This new index confirms that the dollar rose very sharply between January 1980 and February 1985 and that about two-thirds of that appreciation was reversed by July 1986. This is true for both our multilateral and bilateral real indices. The analysis also shows that any index that fails to adjust for differences in inflation rates will give a very misleading impression of the dollar's evolution in the 1980s.

Suggested Citation

  • Philippe Bacchetta & Martin Feldstein, 1987. "How Far Has the Dollar Fallen?," NBER Working Papers 2122, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2122
    Note: EFG ITI IFM

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    References listed on IDEAS

    1. W. Michael Cox, 1986. "A new alternative trade-weighted dollar exchange rate index," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Sep, pages 20-28.
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    Cited by:

    1. J. David Richardson, 1988. "Exchange Rates and U.S. Auto Competitiveness," NBER Chapters,in: Misalignment of Exchange Rates: Effects on Trade and Industry, pages 215-240 National Bureau of Economic Research, Inc.
    2. Poole, William, 1988. "Monetary Policy Lessons of Recent Inflation and Disinflation," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 73-100, Summer.
    3. J. David Richardson, 1987. "Exchange Rates and U.S. Auto Competitiveness," NBER Working Papers 2371, National Bureau of Economic Research, Inc.
    4. Jacques Le Cacheux & François Lecointe, 1987. "Changes réels et compétitivité de la France, l'Italie, la RFA et les Etats-Unis," Revue de l'OFCE, Programme National Persée, vol. 20(1), pages 149-187.

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