DP16311 Dollar and Exports

Author(s): Valentina G. Bruno, Hyun Song Shin
Publication Date: June 2021
Keyword(s): Financial channel of exchange rates, global financial conditions, Us dollar
JEL(s): F32, F34, F42, G15
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16311

The strength of the US dollar has attributes of a barometer of dollar credit conditions, whereby a stronger dollar is associated with tighter dollar credit conditions. Using finely disaggregated data on export shipments, we examine how dollar strength impacts exports through the availability of dollar financing for working capital - an issue of importance due to the greater working capital needs for exports arising from longer supply chains and greater delay in receiving payments. We find that exporters who are reliant on dollar-funded bank credit suffer a decline in exports, and that this decline is larger than any decline in domestic sales. Our findings shed light on the broad dollar index as a global financial factor with real effects on the economy.