Exchange Rates, Business Cycles, and Macro Policy in the Open Economy Q5. Since 1 January 1999 the European Central Bank has been responsible for conducting the monetary policy for the euro area (19 countries and 338 million inhabitants today). Generate two figures: • The first, graph the EUR/USD monthly nominal exchange rate from 1999 to the present. • The second, calculate and graph the EU real exchange rate from 1999 to the present, using the CPI of the United States (one of the largest trading partners of the European Union) for the “foreign” price level and the EU CPI (or HCI) for the domestic price level. Comparing the two graphs you have generated, would you say that real exchangerate fluctuations arise primarily from nominal exchange-rate fluctuations or from changes in domestic and foreign price levels?
Ch.13 – Exchange Rates, Business Cycles, and Macro Policy in the Open Economy
Q5. Since 1 January 1999 the European Central Bank has been responsible for
conducting the
inhabitants today). Generate two figures:
• The first, graph the EUR/USD monthly nominal exchange rate from 1999 to
the present.
• The second, calculate and graph the EU real exchange rate from 1999 to the
present, using the CPI of the United States (one of the largest trading
partners of the European Union) for the “foreign”
(or HCI) for the domestic price level.
Comparing the two graphs you have generated, would you say that real exchangerate fluctuations arise primarily from nominal exchange-rate fluctuations or from
changes in domestic and foreign price levels?
Note, for the US CPI use the
Index 2015=100, Monthly, Not Seasonally Adjusted. For the HCI use the Harmonized
Index of Consumer Prices: All Items for Euro area (19 countries)).
Q6. Plot the exchange rate of the Hong Kong dollar relative to the U.S. dollar from
January 1981 to the present. Was the Hong Kong dollar generally appreciating or
happened after 1983? Research and find an explanation
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