Responsiveness of U.S. Exports to Real Exchange Rate: Evidence from Top 10 U.S Trading Partners

Abstract

This study investigates the impact of changes in the value of the US dollar on U.S exports to major trading partners of the US. The findings indicate that major trading partners are more likely to demand more US products when the value of the US dollar depreciates. Furthermore, a ten percent decrease in the US real effective exchange rate will cause an approximate increase of 3% of total US exports. In addition, the fluctuations in national income levels for top trading partners of the US can determine the amount of their demand of US products as well. In other words, an increase in national income for most of the trading partners will lead to an increased demand for U.S goods. The author studies the impact of fluctuations between the value of the US dollar to U.S exports to major trading partners. The conclusion reveals that top trading partners demand more of the U.S goods when the US dollar depreciates. Furthermore, a ten percent decrease in the US real effective exchange rate leads to an increase of almost 3 % of total US exports. Changes in income level for top trading partners can determine the amount of exports as well. Moreover, a rise in income for trading partners leads to an increase demand for U.S goods.