Macroeconomics › Section P · Exchange rates and international capital flows › Topic P.3
Macroeconomic effects of exchange rates
An exchange rate is more than a number for tourists. It changes what exporters earn, what imports cost, how fast prices rise and, in the worst cases, whether a country's banks survive. That is why central banks watch it closely.
In this topic
- Why the exchange rate matters to a whole economy
- Net exports and aggregate demand
- Worked example: an exporter squeezed
- Import prices and inflation
- The real exchange rate
- Are imports a leak?
- The cost of volatility
- When exchange rates break banks
- Worked example: a currency mismatch
- Common mistakes to avoid
- Key takeaways
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