Dominant Currencies and External Adjustment

Author: Gustavo Adler, Camila Casas, Mr. Luis M. Cubeddu, Ms. Gita Gopinath, Ms. Nan Li, Sergii Meleshchuk, Ms. Carolina Osorio Buitron, Mr. Damien Puy, and Mr. Yannick Timmer

This SDN documents features of international trade & finance, explores their implications for how exchange rates can help external rebalancing and buffer shoks.

Volume/Issue: Volume 2020 Issue 005

Publication date: July 2020

ISBN: 9781513512150

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Investments and Securities-General , Money and Monetary Policy , SDN , currency pricing , financing currency , Colombian peso , currency financing , expenditure switching , invoicing data , invoicing currency , Currencies , Exchange rates , Exports , Depreciation , Imports , Global , trade pricing , trade invoicing , exchange rate , external adjustment

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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.