The global real value of the United States dollar, 1950-1990.

摘要

Tracking the US dollar's real value remains important because of its continuing role as the de facto world currency. However, existing indices of the dollar do not have the global scope that befits its international currency status. With their narrow currency inclusion, their use of trade weights, and their neglect of a weight for the US dollar's host economy, existing dollar indices do not reflect the full range of demand and supply factors that impact on the dollar's global real value. To get a fuller coverage of these factors and to better understand the relation between changes in the theoretical determinants of the dollar's value and the actual outcomes, a new dollar index is developed--the GR119 index.; GDP-based weights for 119 countries including the host US economy are used in the GR index implementation. This wide-currency trait of the index facilitates the computation of sub-indices that detail region-wide and country-specific contributions to the GR index value. The use of period-specific moving weights allows the decomposition of the sources of change in the GR119 index, both in terms of factor components (relative price and nonrelative price factors) and key regions, which is not possible with other indices. This decomposition together with the regional dimensions of the GR119 index provides a comprehensive measure of the dollar's real value that is truly global in scope.; The GR119 index and its decomposition results, show that Purchasing Power Parity (PPP) factors do not control the dollar's real value in either the fixed or the flexible exchange periods. Non-PPP factors, like relative income growth, capital flows, and institutional shifts are also important. The GR regional indices confirm the significance of the Europe-Canada-Japan area in determining the dollar's global value. But they also point out that traditional dollar indices leave out significant information by neglecting other important regions. Country-level analysis of the GR indices also reveals the 'misalignment' of currencies and the tendency of some developing areas to indulge in extreme competitive depreciation which adds to the real value of the US dollar.