In the wake of my little post on Oregon's trade weighted dollar index, Josh Lehner at the Oregon Office of Economic Analysis' Blog discusses it in depth and points us to the index that his office keeps. Here is an excerpt:
Given Oregon’s industrial makeup (the state’s manufacturing location quotient for 2009 was 1.143, with durable goods registering a 1.309) and geographic location, the state has long been a major exporter and international trade is a pillar of the state’s economy. According to research, Oregon is the fifth most trade-dependent state in the U.S. and a recent Brookings Institute report (see page 15) shows that the Portland-Vancouver MSA is the second most trade-dependent metro in the country behind only Wichita, KS. (Wichita is the “Air Capital of the World” and has long been a major player in the aircraft industry with operations by Boeing, Airbus, Leerjet and Cessna, among others.) Seeing that exports play a major role in Oregon’s economy and international trade is influenced by exchange rates, tracking the international competitiveness of Oregon’s exports is important to determine the economic health of the state and also to help gauge future trends. It also stands to reason that for a trade-dependent state, such as Oregon, a dollar index is a leading indicator for local employment. As the dollar becomes more competitive, it will boost Oregon exports, which in turn will lead to increased employment as the exporting firms need to hire additional workers to fill orders and the ports will hire additional workers to load/unload the products onto ships, barges and airplanes.
Generally speaking, what the Dallas Fed is now undertaking follows the methodology of our office’s Oregon dollar index, however there are a few differences that lead to slightly different outcomes. First, the graph below illustrates our office’s Oregon dollar index and the Major Currency dollar index from the Federal Reserve over the past 15 years.
The fact that the Dallas Fed uses the Top 25 trading partner countries and our office uses just the Top 15 countries may seem like a potentially large difference, however, based on data over the past 15 years, it is not. On average, the Dallas Fed notes that their indexes cover 89 percent of all exports for each state. That means, the Top 25 trading partners account for 89 percent of each states’ exports. In Oregon, the Top 15 trading partners account for an average of 84 percent of all exports and depending upon the year, the exact percentage falls within the 82-88 percent range. With such a small difference between using the Top 15 compared to the Top 25, the overall dollar index for the state would not be changed significantly.
Overall, the continued depreciation of the U.S. dollar and also the Oregon Dollar Index, is good news for exports (and manufacturers of export goods), which should continue to increase as the global expansion continues.
Go read the rest of the post there.