Table 1.3 gives the foreign exchange rates for seven industrialized countries for years 1977-1998. Except for the United Kingdom, the exchange rate is de?ned as the units of foreign currency for one U.S. dollar; for the United Kingdom, it is de?ned as the number of U.S. dollars for one U.K. pound.
a. Plot these exchange rates against time and comment on the general behavior of the exchange rates over the given time period.
b. The dollar is said to appreciate if it can buy more units of a foreign currency. Contrarily, it is said to depreciate if it buys fewer units of a foreign currency. Over the time period 1977-1998, what has been the general behavior of the U.S. dollar? Incidentally, look up any textbook on macroeconomics or international economics to ?nd out what factors determine the appreciation or depreciation of a currency.
TABLE 1.3 EXCHANGE RATES FOR SEVEN COUNTRIES: 1977-1998
|
Year
|
Canada
|
France
|
Germany
|
Japan
|
Sweden
|
Switzerland
|
U.K.
|
|
1977
|
1.063300
|
4.916100
|
2.323600
|
268.6200
|
4.480200
|
2.406500
|
1.744900
|
|
1978
|
1.140500
|
4.509100
|
2.009700
|
210.3900
|
4.520700
|
1.790700
|
1.918400
|
|
1979
|
1.171300
|
4.256700
|
1.834300
|
219.0200
|
4.289300
|
1.664400
|
2.122400
|
|
1980
|
1.169300
|
4.225100
|
1.817500
|
226.6300
|
4.231000
|
1.677200
|
2.324600
|
|
1981
|
1.199000
|
5.439700
|
2.263200
|
220.6300
|
5.066000
|
1.967500
|
2.024300
|
|
1982
|
1.234400
|
6.579400
|
2.428100
|
249.0600
|
6.283900
|
2.032700
|
1.748000
|
|
1983
|
1.232500
|
7.620400
|
2.553900
|
237.5500
|
7.671800
|
2.100700
|
1.515900
|
|
1984
|
1.295200
|
8.735600
|
2.845500
|
237.4600
|
8.270800
|
2.350000
|
1.336800
|
|
1985
|
1.365900
|
8.980000
|
2.942000
|
238.4700
|
8.603200
|
2.455200
|
1.297400
|
|
1986
|
1.389600
|
6.925700
|
2.170500
|
168.3500
|
7.127300
|
1.797900
|
1.467700
|
|
1987
|
1.325900
|
6.012200
|
1.798100
|
144.6000
|
6.346900
|
1.491800
|
1.639800
|
|
1988
|
1.230600
|
5.959500
|
1.757000
|
128.1700
|
6.137000
|
1.464300
|
1.781300
|
|
1989
|
1.184200
|
6.380200
|
1.880800
|
138.0700
|
6.455900
|
1.636900
|
1.638200
|
|
1990
|
1.166800
|
5.446700
|
1.616600
|
145.0000
|
5.923100
|
1.390100
|
1.784100
|
|
1991
|
1.146000
|
5.646800
|
1.661000
|
134.5900
|
6.052100
|
1.435600
|
1.767400
|
|
1992
|
1.208500
|
5.293500
|
1.561800
|
126.7800
|
5.825800
|
1.406400
|
1.766300
|
|
1993
|
1.290200
|
5.666900
|
1.654500
|
111.0800
|
7.795600
|
1.478100
|
1.501600
|
|
1994
|
1.366400
|
5.545900
|
1.621600
|
102.1800
|
7.716100
|
1.366700
|
1.531900
|
|
1995
|
1.372500
|
4.986400
|
1.432100
|
93.96000
|
7.140600
|
1.181200
|
1.578500
|
|
1996
|
1.363800
|
5.115800
|
1.504900
|
108.7800
|
6.708200
|
1.236100
|
1.560700
|
|
1997
|
1.384900
|
5.839300
|
1.734800
|
121.0600
|
7.644600
|
1.451400
|
1.637600
|
|
1998
|
1.483600
|
5.899500
|
1.759700
|
130.9900
|
7.952200
|
1.450600
|
1.657300
|
Source: Economic Report of the President, January 2000 and January 2001.