Dollar and Exports.

This article investigates the role of the U.S. dollar as a key factor influencing global trade through its impact on credit supply, focusing on the financial channel of exchange rates. Using detailed firm-level export and bank lending data from Mexican exporters, the study finds that appreciation of the U.S. dollar tightens credit supply from banks reliant on short-term dollar funding, leading to a significant slowdown in exports, including exports to the United States where traditional trade competitiveness effects would predict an increase. The analysis highlights that this financial channel operates in opposition to the conventional competitiveness channel and is particularly pronounced for firms engaged in intermediate goods and those dependent on dollar-funded bank credit. The findings underscore the interconnectedness of financial globalization and international trade, showing that fluctuations in the dollar affect export performance by altering working capital financing conditions rather than just price competitiveness.