This paper estimates and tests four models of the effects of exchange rate changes on export prices. It finds that exporters adjust their prices by about half of any movement in exchange rates, with exchange rate movements against importing countries accounting for only three-fifths of this price adjustment, while exchange rate movements against a dominant currency account for the other two-fifths. The dominant currency is the euro in Europe and Africa and the US dollar in Asia and the Western Hemisphere. The paper concludes that the recent claim that the dollar is the most important driver of export prices is valid only for the smallest exporting economies, and for the bulk of international trade, the extra effects of the dollar (or the euro) beyond their effects as exporter or importer currencies are relatively modest.
