Impacts of the US dollar (USD) exchange rate on economic growth and the environment in the United States

Abstract

This paper investigates the impact of the USD exchange rate on economic growth and the environment in the United States by using a Structural Vector Autoregression (SVAR) model. The analysis is based on quarterly country-level data on the real trade weighted US dollar index, petroleum consumption, renewable energy consumption, net imports of pollution intensive products, real GDP and CO2 emissions during the 1989–2015. The result shows that the USD exchange rate is positively related to petroleum consumption, net imports of the United States in pollution intensive industries with major U.S. trading partners, real GDP and CO2 emissions. Moreover, petroleum consumption increases real GDP and domestic CO2 emission levels, while net imports of pollution intensive products decrease real GDP and does not significantly affect CO2 emissions.