Illustrate about the effective exchange rate, Macroeconomics

Illustrate about the Effective exchange rate

Assume that we are interested in external competitiveness of a country, say Japan. To do this we could look at evolution of a specific exchange rate, say exchange rate between the Japanese yen (JPY) and USD. The problem with this idea is that this exchange rate will reflect the external competitiveness and events in US as much as in Japan. If we want to isolate Japan without including events in other nations, we look at the effective exchange rate instead. Effective exchange rate is the price of a basket of currencies where every currency is weighted in relation to its significance to the country. Then such a price level is divided by a constant such that its value is exactly 100 at a given point in time. If, for instance, price index is 110 one year after the base year, then currency has depreciated by an average of 10% against other currencies that year.

 

Posted Date: 9/12/2013 6:23:00 AM | Location : United States







Related Discussions:- Illustrate about the effective exchange rate, Assignment Help, Ask Question on Illustrate about the effective exchange rate, Get Answer, Expert's Help, Illustrate about the effective exchange rate Discussions

Write discussion on Illustrate about the effective exchange rate
Your posts are moderated
Related Questions
Changes in demand-Baby diapers and retirement villagesOther things equal, an increase in the number of buyers for a product or service will increase -demand. Baby diapers and retir

Differentiate economic growth and economic development. Economic growth is a raise into real GDP. GDP is only one dimension of development and therefore is a narrow measure of

(A) What is the difference between a movement along a demand or supply curve and a shift of one of these curves? Why is it important to distinguish between the two? What mistake

Because the structure of the personal income tax is progressive, a larger share of income is taxed at higher rates as real income increases. Therefore, economic growth automaticall

Examine the pros and cons of commercial transactions in blood from the egoistic, the utilitarian, and the Kantian perspectives

what are the purposes of taxation?

explain the effects of various injections and withdrawals and show the equilibrium in the circular flow

Some countries that supply oil to petrol manufacturers are located in or near the Middle East, others are not located in or near the Middle East. (i) Does the war benefit or har

(a) Use this information to set up a diagram showing the firm''s total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.

Derive saving- investment recognize in the context of an open economy. From national income accounting shows that an enhance in taxes (whereas transfer unchanged) must imply a