Staff Discussion Notes

Dominant Currencies and External Adjustment

By Gustavo Adler, Camila Casas, Luis M. Cubeddu, Gita Gopinath, Nan Li, Sergii Meleshchuk, Carolina Osorio Buitron, Damien Puy, Yannick Timmer

July 20, 2020

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Gustavo Adler, Camila Casas, Luis M. Cubeddu, Gita Gopinath, Nan Li, Sergii Meleshchuk, Carolina Osorio Buitron, Damien Puy, and Yannick Timmer. Dominant Currencies and External Adjustment, (USA: International Monetary Fund, 2020) accessed November 21, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

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.

Subject: Currencies, Depreciation, Exchange rates, Exports, Foreign exchange, Imports, International trade, Money, National accounts

Keywords: Colombian peso, Currencies, Currency financing, Currency pricing, Depreciation, Exchange rate, Exchange rates, Expenditure switching, Exports, External adjustment, Financing currency, Global, Imports, Invoicing currency, Invoicing data, SDN, Trade invoicing, Trade pricing

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Staff Discussion Notes No. 2020/005

  • Stock No:

    SDNEA2020005

  • ISBN:

    9781513512150

  • ISSN:

    2617-6750

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