02424cas a2200265 a 4500 AALejournalIMF018007 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484327975 1018-5941 BD-DhAAL BD-DhAAL Boz, Emine. Global Trade and the Dollar / Emine Boz, Gita Gopinath, Mikkel Plagborg-Moller. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (66 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We document that the U.S. dollar exchange rate drives global trade prices and volumes. Using a newly constructed data set of bilateral price and volume indices for more than 2,500 country pairs, we establish the following facts: 1) The dollar exchange rate quantitatively dominates the bilateral exchange rate in price pass-through and trade elasticity regressions. U.S. monetary policy induced dollar fluctuations have high pass-through into bilateral import prices. 2) Bilateral non-commodities terms of trade are essentially uncorrelated with bilateral exchange rates. 3) The strength of the U.S. dollar is a key predictor of rest-of-world aggregate trade volume and consumer/producer price inflation. A 1 percent U.S. dollar appreciation against all other currencies in the world predicts a 0.6-0.8 percent decline within a year in the volume of total trade between countries in the rest of the world, controlling for the global business cycle. 4) Using a novel Bayesian semiparametric hierarchical panel data model, we estimate that the importing country's share of imports invoiced in dollars explains 15 percent of the variance of dollar pass-through/elasticity across country pairs. Our findings strongly support the dominant currency paradigm as opposed to the traditional Mundell-Fleming pricing paradigms. Mode of access: Internet Gopinath, Gita. Plagborg-Moller, Mikkel. IMF Working Papers; Working Paper ; No. 2017/239 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/239/001.2017.issue-239-en.xml IMF e-Library