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Does a fall in the dollar mean higher U.S. consumer prices?

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  • Diego Valderrama

Abstract

This Economic Letter looks at the relationship among changes in the exchange rate value of the dollar and in import prices and overall consumer prices, with a particular focus on the current circumstances. It appears that the lower value of the dollar at this point is affecting U.S. prices less than it has historically. The reasons for the difference include changes in trading partners, changes in the composition of U.S. trade, and improved monetary policy over the last several years. Looking ahead, then, it appears likely that the recent dollar depreciation will have only very moderate effects on overall consumer prices.

Suggested Citation

  • Diego Valderrama, 2004. "Does a fall in the dollar mean higher U.S. consumer prices?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may9.
    • Handle: RePEc:fip:fedfel:y:2004:i:may9:n:2004-21
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    References listed on IDEAS

    as
    1. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    2. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
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