[lbo-talk] GS on the dollar

[Doug Henwood]

>DAILY FINANCIAL MARKET COMMENT 05/20/03 Goldman Sachs Economics
>
>*  Today's comment takes a statistical look at the likely impact
>of the dollar on net exports.  We estimate that the
>depreciation seen to date should be just about sufficient to
>stem the deterioration in the real trade balance over the next
>few quarters.  Thus, net trade should become a neutral rather
>than negative factor for growth.  This constitutes a modest
>upside risk relative to our current forecast that net exports
>will subtract 0.2 percentage point (annualized) from the
>growth pace in the next six quarters.
>
>*  In addition, dollar depreciation could have a number of
>indirect effects on the growth pace, which could be either
>positive or negative.  On the positive side, it might boost US
>profits and capital spending and could encourage foreign
>countries to adopt more expansionary policies.  On the
>negative side, it cuts the real income of US households and
>could raise the risk premia on US financial assets.  Our best
>guess is that the indirect effects broadly cancel out.