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Exchange Rates - Lecture#20 Exchange Rates Econ 1110 Spring...

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Econ 1110, Spring 2008, Professor Te 1 Lecture #20 Exchange Rates
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Econ 1110, Spring 2008, Professor Te 2 Nominal Exchange Rate Number of Units of Foreign Currency that Can Be Purchased with One Unit of Home Currency Exchange Rate Regimes Flexible (floating) Fixed Currency board European monetary unification - Euro
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Econ 1110, Spring 2008, Professor Te 3 Real Exchange Rate Number of Foreign Goods that Can Be Purchased with One Home Good e e P P nom For = bottle euros bushel dollars dollar euros bushel bottles =
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Econ 1110, Spring 2008, Professor Te 4 Changes in Exchange Rate Exchange Rate System Increase Value of Currency Decrease Value of Currency Flexible Exchange Rates Appreciation Depreciation Fixed Exchange Rates Revaluation Devaluation
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Econ 1110, Spring 2008, Professor Te 5 Real vs. Nominal Exchange Rate Movements P eP e For nom = ( 29 P P eP eP e e For For nom nom - = π π - + = For nom nom e e e e
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Econ 1110, Spring 2008, Professor Te 6 Inflation & Changes in Real & Nominal Exchange Rates 1973-II to 2005-IV -6 -4 -2 0 2 4 6 8 10 1973 1976 1979 1982 1985 1988 1991 1994
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