1. Suppose we observe the following information for the euro area, Canada, and the United States. The exchange rates given in the table are the currency-per-U.S.-dollar rates.
|
|
S (2011)
|
S (2012)
|
CPI (2011)
|
CPI (2012)
|
2011 U.S. Exports
|
2011 U.S. Imports
|
|
Euro Area
|
0.672
|
0.719
|
118.0
|
120.4
|
$ 261,380
|
$ 335,555
|
|
Canada
|
1.00
|
0.981
|
117.2
|
118.8
|
$ 274,510
|
$ 367,927
|
|
United States
|
|
|
122.6
|
122.3
|
|
|
Using this information, calculate the 2011 and 2012 effective exchange values for the U.S. dollar using 2011 as the base year. Do the values you calculated indicate an ppreciation or depreciation of the U.S. dollar? What is the rate of appreciation or preciation?
2. Using the data in Question 1, calculate the real effective exchange values of the dollar. Do the values you calculated indicate an appreciation or depreciation of the U.S. dollar? What is the rate of appreciation or depieciation?
3. In 2011, the spot rate of exchange between the Turkish lira (Tl) and the euro was 2.016 Tl/€. In 2012, the rate was 2.348 Tl/€. Based on this information, did the euro appreciate or depreciate relative to the Turkish lira? What was the amount, in percentage-terms, of the appreciation/depreciation?
4. Based on your answer to Question 3, what was the impact of the exchange-rate change on European consumers' purchasing power over Turkish goods and services relative to their purchasing power over European goods and services?
5. In 2011, the CPI for Turkey was 398.2 and the euro-area CPI was 114.4. In 2012, the CPI for Turkey was 456.5 and the euro-area CPI was 120.4. Based on this information, what was the rate of inflation for Turkey and the rate of inflation for the euro area?
6. Using the information in Questions 3 and 5, calculate the real rate of exchange between the Turkish lira and the euro for 2011 and 2012. In real terms, did the euro appreciate or depreciate relative to the Turkish lira? What was the amount, in percentage-change terms, of the appreciation/depreciation?
7. Using the information in Questions 3 and 5, and according to absolute purchasing power parity (PPP), was the euro overvalued or undervalued relative to the Turkish lira in 2012? By what percent?
8. Using the information in Questions 3 and 5, and according to relative purchasing power parity (PPP), what is the predicted value of the euro for 2012? Based on your nswer, was the euro overvalued or undervalued relative to the Turkish lira in 2012? y what percent?