Why a Dollar Depreciation May Not Close the U.S. Trade Deficit

7 Pages Posted: 30 Jul 2007

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Eleanor Wiske Dillon

Federal Reserve Banks - Federal Reserve Bank of New York

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.

Keywords: trade deficit, exchange rate, invoicing, vehicle currency, pass through

JEL Classification: F3, F4

Suggested Citation

Goldberg, Linda S. and Wiske Dillon, Eleanor, Why a Dollar Depreciation May Not Close the U.S. Trade Deficit. Current Issues in Economics and Finance Vol. 13, No. 5, June 2007. Available at SSRN: https://ssrn.com/abstract=1003220

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eleanor Wiske Dillon

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
296
Abstract Views
2,281
rank
100,965
PlumX Metrics