Macroeconomicinterdependenceandtheinternationalroleof the dollar$

The U.S.dollarholdsadominantplaceintheinvoicingofinternationaltrade.Inaddition to adirectroleformostU.S.exportsandimports,itplaysaglobalrolefortradeflows outsidetheUnitedStates.Usingasimplecenter–peripherymodel,weshowthatthis globalrolemagnifiestheexposureofperipherycountriestotheU.S.’smonetarypolicy even whentradeflowswiththeU.S.arelimited.Thisgeneratesgainsfromcoordinated monetarypolicy,asU.S.policyleadstoinefficientmovementsinintra-peripheryrelative prices.Despitethisinefficiency,flexibleexchangeratesremainvaluable