16.2: Changes in Money Supply, Output, and the Exchange Rate

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Chapter 16: Output and the Exchange Rate in the Short Run

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16.2: Changes in Money Supply, Output, and the Exchange Rate

Once the United Kingdom and Italy devalued their currency, they should have been able to increase their money supplies. Did the results look like Figure 16-10? We know the exchange rate went up (depreciated), but can you find data on output and the money supply to see if these are examples of the theory?

Data: Use the data from the previous application (currentacct.xls) for the current account. Download the file macromonthly.xls to get the money supply data (check if the rate of growth changed around the time of the devaluation) and the GDP data.

Data provided courtesy of the International Monetary Fund.

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