# Five problems with floating rate exchange regimes

1. Why this catechism?

The decline in the US dollar price of the euro by 25% from $1.38 to$1.05 has led to a dramatic change in the cost and profit relationships between the production of goods in the eurozone and the production of similar goods in the US. As a hypothetical example consider Deutsche Engineering, which has a plant in Stuttgart
that exports to the US and a similar plant in Mobile, Alabama, which also serves the US market. When the euro traded at \$1.38, the profit-to-sales ratio o

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