Ⅶ Exchange Rate Index

A. What is exchange rate index?

Exchange rate index is a broad measure of the average value of a currency relative toseveral other major currencies.

B. Effective exchange rate

Effective exchange rate is a measure of whether or not the currencyis appreciating or depreciating against a weighted basket of foreigncurrencies.

A weighted average of a currency’s valuerelative to other currencies based on the importance of each currency tointernational trade.

C. What is the trade-weighted exchange rate index?

Real Effective Exchange Rate (REER)

来源：https://www.investopedia.com/terms/r/reer.asp

1. The realexchange rate of the dollar against the euro in 2009 was __________.

 2. The realexchange rate of the dollar against the peso in 2009 was __________.

 3. The dollar was__________ against the euro in nominal term by __________.

  A. appreciated; 6.67%

  B. depreciated; 6.67%

  C. appreciated; 7.14%

  D depreciated; 7.14%

 4. The Mexican pesowas __________ against the dollar in nominal term by __________.

  A. appreciated; 3.39%

  B. depreciated; 3.39%

  C. appreciated; 3.28%

  D. depreciated; 3.28%

 5. The volume ofthe German foreign trade with the U.S. was __________.

 6. The volume ofthe Mexican foreign trade with the U.S. was __________.

 7. Assume the U.S. trades only with the Germany and Mexico. Now if we want to calculatethe dollar effective exchange rate in 2009 against a basket of currencies ofeuro and Mexican peso, the weight assigned to the euro should be __________.

 8. The weightassigned to the peso should be __________.

 9. Assume the 2008is the base year. The dollar effective exchange rate in 2009 was __________.

 10. Was the dollargenerally stronger or weaker in 2009 according to your calculation?

1. 0.70 x(105.3/102.5) = 0.7 x 1.0273 = 0.7191

2. 12.2 x (105.3/110.5) = 12.2 x .9529 = 11.6259   

3. B (0.7 /.75) –1 = -6.67%  

4. D(1/12.2)/(1/11.8) – 1 = -3.28%

5. 550   

6. 360   

7. 550/910 =60.44%  

8. 360/910 = 39.56

9.(0.70/0.75)(60.44%) + (12.2/11.8)(39.56%) = .5641 + 0.4090 = .9731 = 97.31%   

10. weaker,because dollar depreciated by 2.69%.