# Pegged Exchange Rates The United States, Argentina, and Canada commonly engage in international trade with each other. All the products traded can easily be produced in all three countries. The traded products are always invoiced in the exporting country’s currency. Assume that Argentina decides to peg its currency (called the peso) to the U.S. dollar and the exchange rate will remain fixed. Assume that the Canadian dollar appreciates substantially against the U.S. dollar during the next year. What is the likely effect (if any) of the Canadian dollar’s exchange rate movement over the year on the volume of Argentina’s exports to Canada? Briefly explain. What is the likely effect (if any) of the Canadian dollar’s exchange rate movement on the volume of Argentina’s exports to the United States? Briefly explain.

FindFind

### International Financial Management

14th Edition
Publisher: Cengage
ISBN: 9780357130698
FindFind

### International Financial Management

14th Edition
Publisher: Cengage
ISBN: 9780357130698

#### Solutions

Chapter 6, Problem 28QA
Textbook Problem

## Pegged Exchange Rates The United States, Argentina, and Canada commonly engage in international trade with each other. All the products traded can easily be produced in all three countries. The traded products are always invoiced in the exporting country’s currency. Assume that Argentina decides to peg its currency (called the peso) to the U.S. dollar and the exchange rate will remain fixed. Assume that the Canadian dollar appreciates substantially against the U.S. dollar during the next year. What is the likely effect (if any) of the Canadian dollar’s exchange rate movement over the year on the volume of Argentina’s exports to Canada? Briefly explain. What is the likely effect (if any) of the Canadian dollar’s exchange rate movement on the volume of Argentina’s exports to the United States? Briefly explain.

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