Import prices will therefore depend on changes in the bilateral exchange rate between the local and the dominant currency, rather than that between the local and producer currency. For evidence, see Goldberg, L and Tille, C (2009), ‘Macroeconomic interdependence and the international role of the dollar’, Journal of Monetary Economics, 56 (7), pp. 9901003; and Gopinath, G(2016). “The International Price System,” Jackson Hole Symposium Proceedings. 9 Gopinath (2016), ibid, and Ito, H, and Kawai, M (2016), ‘Trade Invoicing in Major Currencies in the 1970s-1990s: Lessons for Renminbi Internationalization’, Journal of the Japanese and International Economies, Volume 42, pp. 123–145. 10 For a country with a large share of trade invoiced in dollars, a depreciation against the dollar raises the domestic price of imports, causing domestic households and firms to switch their expenditure away from foreign goods. But it leaves the (dollar) price of exports in the markets in which they are sold unchanged, albeit making them more profitable for domestic exporters in terms of home currency. Because imports would fall straight away and it would take time for the export sector to expand to take advantage of the higher profits, it is therefore likely that a rebalancing of the economy from imports to exports would be slower than if traded goods were priced in the currencies of their production. In addition, other things equal, the rise in import prices would lead to a pick-up in imported inflationary pressure.
8/9  As this is my last appearance before the Senate as Governor of the Banco de España, and to conclude, I should like to express my gratitude for the consideration that has always been extended to the Bank and to me in this chamber, and for the quality of the interventions and questions raised on which I have had to comment. I have always thought, and have said so on different occasions, that the lower and upper houses are the “natural fora” in which an institution such as the Banco de España should preferentially express itself, cooperating and contributing, as best it can, to parliamentary functions. Thank you for your attention. 9/9