Abstract
Since June 2014, the dollar has strengthened dramatically. The effects of such a rise—and its likely continuation—on the U.S. economy are many, complex, and often obscure and could affect a number of business decisions. In this paper, the authors investigate the impact of a 10 percent rise in the value of the dollar against all other currencies through the use of a macroeconometric model. They examine direct effects and the full range of indirect effects and find that through a number of negative feedback the indirect effects will significantly offset the direct effects on GDP, interest rates, and many other macroeconomic variables—including the value of the dollar itself.
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