Define effective exchange rate, Macroeconomics

Assignment Help:

Q. Define Effective exchange rate?

Suppose that we are interested in external competitiveness of a country, let's say Japan. To do this we could look at evolution of a particular exchange rate, say exchange rate between the Japanese yen (JPY) and USD. The problem with this idea is that this exchange rate would 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 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. Such a price level is then 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.


Related Discussions:- Define effective exchange rate

Economic luxury and an economic necessity, What is the difference between a...

What is the difference between an economic luxury and an economic necessity? Ans) An economic luxury is wasting land on pools huge garden, etc. An economic requirement is what y

Cost benefit analysis-vat, (1) Based on the article, describe as best you c...

(1) Based on the article, describe as best you can: (i) the reference group for the cost benefit analysis, (ii) the purpose of the study (i.e., what is the "project" in this

Principle of acceleration, importance and limitation of principle of accele...

importance and limitation of principle of acceleration

Consumer safety and product information, Can you think of examples where th...

Can you think of examples where the government does not intervene enough when it comes to consumer safety and product information? Examples where too much intervention is the case

Government imposes a price floor, Consider the above table. Assuming the go...

Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result? a. no change, equilibrium would prevail b. T

Economics of scale exist, This economics of scale exist for all of the foll...

This economics of scale exist for all of the following reasons except: a. bureaucratic inefficiencies b. management problems c. failures in information flows d. firm size is to

Relate overnight interest rates with interest rates, Relate overnight inte...

Relate overnight interest rates with interest rates By controlling overnight interest rates, the central bank will affect the interest rates with longer maturity. The reason f

World real gdp per capita, ihave real gdp per capita for all countries in w...

ihave real gdp per capita for all countries in world .. how can i calculate world real gdp per capita by using the data.

Two-period model, Suppose that a household in a two-period model has incom...

Suppose that a household in a two-period model has income of $30,000 in period 1 and $25,000 in period 2, and the interest rate is 75 percent. Assume that the price of the good is

Economics, Ask question #Minimum 100 words accepted I need help with homew...

Ask question #Minimum 100 words accepted I need help with homewok

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd