Recent attention has focused on measures of the dollar's effective exchange rate amid disappointment by some observers … with the response of the U.S. trade balance to the depreciation of the dollar since February 1985. In particular, these … observers suggest that the traditional indexes, which include only currencies of industrial countries, overstate the dollar …

The pattern of international trade adjustment is affected by the continuing international role of the dollar and … related evidence on exchange rate pass-through to prices. This paper argues that a depreciation of the dollar would have … dollar depreciation on real trade flows is dominated by an adjustment in U.S. export quantities, which increase as U.S. goods …

-weighted dollar and real bilateral rates against the dollar. However, taking these additional factors into account reduces the … estimated effects of interest rates on the dollar. An error-correction model that includes these factors explains about half of … the in-sample variation of changes in the real trade-weighted dollar and has out-of-sample prediction errors that are 60 …

dollars. Expectations of yen appreciation against the dollar have been (1) consistently large, (2) variable, and (3) greater … than the forward premium, implying that investors were willing to accept a lower expected return on dollar assets. At short …