Who Captures Export Windfalls? Exchange Rates, Export Profitability, and National Saving under Dominant-Currency Pricing

Under dominant-currency pricing—where many export prices are set in dollars—the real exchange rate allocates export windfalls between producers and consumers. When the real exchange rate is stable, rising dollar export revenues pass through nearly one-for-one into higher real local-currency export income, profits, and retained earnings; when it appreciates, part of the windfall accrues to consumers through cheaper imports, compressing exporters' margins. National saving should therefore respond to real local-currency export income—the portion accruing to domestic producers—rather than to dollar receipts per se. Using five-year panels for 42 economies over 1982–2022, we find that the national saving rate rises by about 0.27 percentage points for each 1 percentage point of GDP increase in real local-currency export income, while dollar export income has no independent effect once the local-currency measure is included. Peru versus Brazil during the commodity boom, China's post-WTO export surge, and Argentina's 2002 devaluation validate the mechanism and its timing. A coefficient estimated from 41 countries predicts China's 9.7-percentage-point saving increase (2002–2007) with an error of just 0.1 point. These findings reinterpret the "global saving glut" as the aggregate outcome of export booms whose windfalls accrued disproportionately to high-saving producers when real exchange rates remained stable.