An introduction to a new exchange-rate index to measure the foreign-exchange value of the dollar. The authors develop a model of U.S. merchandise trade, featuring the new index.

An analysis of the possible effects of dollar depreciation on prices and inflation, on the balance of trade, and on real gross national product.

An estimation of the costs and benefits that dollar depreciation imposes through changes in the prices of imports and exports, and through changes in the potential purchasing power of U.S. international assets and liabilities.

The Japanese auto industry is used as a case in point to illustrate some of the ways in which firms operating in export markets cope with exchange-rate changes.

An examination of causality between dollar exchange-rate movements and U.S. price levels as described by the relative purchasing power parity theory, with a discussion of channels of price pressure and of the Hooper-Lowrey method of estimating future trends of the dollar.