Where Is the Dollar Headed?

Abstract

Every semester I ask my macroeconomics students the same question: if the price of copper falls, what should happen to the dollar? The answer is also always the same: the dollar rises. The students' arguments run more or less as follows: lower capital inflows reduce the supply of dollars in the economy, and therefore the number of pesos needed to buy a dollar (its price), what we know as “the dollar,” goes up. Continue reading...