Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. CHAPTER 13 Exchange Rates: Why Do They Change?

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-1 The Real Exchange Rate

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-2 Real Exchange Rate Is an Index Number

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-3 Real versus Nominal Exchange Rates

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-4 Percentage Change in the Real Exchange Rate

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-5 Percentage Changes: Nominal Exchange Rates, Inflation Rates, and Real Exchange Rates

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-6 Review of Exchange Rate Measures

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-7 Nominal Effective and Real Effective Exchange Rates for the U.S. Dollar Relative to a Broad Index of Major U.S. Trading Partners Source: Federal Reserve Board, Foreign Exchange Rates, Summary (accessed September 25, 2006).

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-8 Nominal Effective and Real Effective Exchange Rates for the U.S. Dollar Relative to an Index of Major Foreign Currencies Source: Federal Reserve Board. Foreign Exchange Rates, Summary (accessed September 25, 2006).

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit 13-9 Supply and Demand: What Goes on the Horizontal Axis?

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Putting Supply and Demand into a Familiar Context

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Swiss Franc Market and Dollar Market for Foreign Exchange

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Major Groups That Demand Swiss Francs

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Major Groups That Supply Swiss Francs

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Equilibrium Exchange Rate and Quantity per Period

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Demand for Swiss Francs is a Mirror Image of the Dollar Supply

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Supply of Swiss Francs is a Mirror Image of the Dollar Demand

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Major Factors That Affect Nominal Exchange Rates

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Effects of an Increase in Mexico’s Relative Price Level

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Effects of an Increase in Mexico’s Relative Real GDP

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Effects of Falling Mexican Interest Rates Relative to the United States

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Effects of an Increase in Mexico’s Relative Risks or Taxes, or Effects of Relatively Unfavorable Mexican Investment Return Expectations

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Spot Market Speculation Effects of an Expected Appreciation of the Peso

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Forward Market Speculation Effects of an Expected Increase in the Peso’s Value

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Effects of Bank of Mexico Intervention to Raise the Peso’s Value

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit The Effects of Bank of Mexico Foreign Exchange Market Intervention to Raise the Value of the Peso

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Summary of Effects of Central Bank Intervention

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Alternative Exchange Rate Systems

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit Stabilizing Central Bank Intervention

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit De Facto Exchange Rate Regimes* Source: International Monetary Fund, Classification of Exchange Rate Arrangements and Monetary Policy Frameworks, De Facto Exchange Rate Arrangements and Anchors of Monetary Policy as of December 31, 2005, (accessed September 26, 2006).

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Economic Information for Switzerland, 2001–2005

Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved. Exhibit A13-1 Downward-Sloping Supply of Swiss Francs