Dollar Shortage


DEFINITION of 'Dollar Shortage'

A dollar shortage occurs when a country lacks a sufficient supply of U.S. dollars for use in international trade. One way to accumulate dollars is for a country to export more goods (paid for in dollars) than it imports. However, many countries are net importers, and therefore do not naturally accumulate enough dollars through their balance of payments. If the dollar shortage is critical, sometimes a country may request assistance from the U.S. for temporary liquidity.

BREAKING DOWN 'Dollar Shortage'

The U.S. dollar is one of the most important currencies used in international trade. Since the U.S. is the largest economy in the world (as of 2009), trade with the U.S. is an important facet of many countries' economies. In addition, the dollar is favored as a currency in international trade because of its stability as a store of value. One of the most important examples is crude oil, which is priced and sold in U.S. dollars worldwide.

  1. Trade War

    A negative side effect of protectionism that occurs when Country ...
  2. Liquidity Crisis

    A negative financial situation characterized by a lack of cash ...
  3. Trade Finance

    The financing of international trade. Trade finance includes ...
  4. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  5. Transaction Exposure

    The risk, faced by companies involved in international trade, ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Economics

    Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.
  2. Options & Futures

    Exploring Non-Dollar Currencies For Forex Trading

    Learn how investments in foreign currencies can diversify your portfolio.
  3. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  4. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  5. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  6. Forex Education

    Global Trade And The Currency Market

    Learn how the Bretton Woods system got the ball rolling for world trade.
  7. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  8. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  9. Investing

    5 Companies Benefiting From Germany's Record Surplus

    A weaker euro is boosting German exports, which have led to a record trade surplus. Here are five German companies reaping the benefits.
  10. Economics

    Ukraine-Russian Sanctions: The Gift That Keeps On Giving

    The repercussions of Russia's 2014 invasion of Crimea are nowhere near over. The Ukraine says Russian aircraft are no longer welcome to take off or land in Ukraine's airports.
  1. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  4. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!