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A depreciation of the home currency has the opposite effects. Thus, depreciation of a currency tends to increase a country's balance of trade (exports minus imports) by improving the competitiveness of domestic goods in foreign markets while making foreign goods less competitive in the domestic market by becoming more expensive.
The initial effect of dollar depreciation to $.011/yen is to make imports cost $110 million, and the deficit rises to $50 million. If the long-run export and import elasticities equal .5 and -.5, exports will rise 5% to $63 million and imports will fall 5% to $104.5 million.
Export Impact: A stronger dollar can make US exports more expensive and less competitive in global markets. Capital Flows: The US experiences significant inflows of foreign investment, which can stimulate economic growth but also lead to volatility in financial markets.
The U.S. will not weaken the dollar in order to boost its exports, Treasury Secretary Timothy Geithner promised. "It is not going to happen in this country," Geithner told Silicon Valley business ...
There is no doubt that the U.S. dollar is getting stronger. During the week ending March 5, the CFTC reported that net dollar longs reached a seven-month high of $23.57 billion, the largest value ...
Thus in a trade war, since exports and imports will decrease equally, for the whole world, the negative effect of a decrease in exports will be compensated by the expansionary effect of a decrease in imports. A trade war therefore does not cause a recession. Furthermore, he notes that the Smoot–Hawley tariff did not cause the Great Depression.
The dollar surged against global currencies last year and looks to remain strong in 2025 if global investors continue pouring money into the booming U.S. stock market, according to Societe ...
A stronger dollar benefits US importers as imports become relatively cheaper. It also benefits foreign exporters as they export products priced in dollars. Notably, a strong dollar harms US exporters as it makes exporting from the US less profitable. A stronger dollar also harms foreign importers as the cost of imports rises.