Case Study

Case Study: Week 4

This case study asks you to discuss how exchange rates are affected by monetary policy, and to explore how the US’s monetary policy actions has the potential to affect its neighbors.

In order to fully explore this, you will need to combine your understanding of the material we’ve worked through thus far in this course with the reading highlighted below, and may bring in outside data if you feel it is additive.

Key Reading for Case Study:

· The Trilemma in Practice: Dealing With Monetary Autonomy in An Economy With A Floating Exchange Rate (Federal Reserve Bank of Dallas)

Your written analysis should address the questions below and should be roughly 3 pages long (single spaced), with an additional page of data or graphs if needed. All It should begin with a brief executive summary and end with a conclusion.

Please make sure that you note your group at the top of your assignment.

Key Questions:

· What is the “policy trilemma”, and how does it help us understand the way in which monetary policy and exchange rates are linked?

· What are the implications of the “policy trilemma” for the United States?

· The paper discusses some ways in which US monetary policy has negatively affected some of our neighbors and/or trade partners in the past. What happened, and why was it a problem?

· What impact should we expect US monetary policy to have on both the value of the US Dollar and the economies of our trading partners today?

Note: if there are other elements of this topic that you wish to discuss in your analysis, you are quite welcome to explore them as long as you ALSO discuss the questions above.

FIN-516 | Managerial Macroeconomics