Working Paper: NBER ID: w29556
Authors: Gita Gopinath; Oleg Itskhoki
Abstract: A handful of currencies, especially the US dollar, play a dominant role in international trade. We survey the active theoretical and empirical literature that documents patterns of currency use in global trade, the implications of dominant currencies for international transmission of shocks, exchange rate pass-through, expenditure switching, and optimal monetary policy. We describe advances in the endogenous currency choice literature including conditions for the emergence and persistence of dominant currency equilibria.
Keywords: No keywords provided
JEL Codes: F30; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Depreciation of the US dollar (F31) | Increase in US exports (F10) |
| Depreciation of the US dollar (F31) | Decrease in US imports (F69) |
| Dominant currency paradigm (DCP) (F31) | Expenditure switching (D12) |
| Dominant currency paradigm (DCP) (F31) | Trade dynamics (F14) |
| Exchange rate pass-through (ERPT) (F31) | Import prices (P22) |