Thus, the stability of Euroland s trading partners is also an important variable to consider. The second table shows that the interaction of the variations in the exchange rate with the standard measure of openness reveals that Euroland is substantially more exposed to external shocks than the United States. And, as mentioned, Euroland is significantly more open than the United States. Combining these two indicators suggests that Euroland is about three times as exposed to external financial shocks as the United States. Given this exposure, it is not surprising that the exchange rate plays a prominent role in Euroland monetary policy discussions.
Calculations are preliminary.
In particular, stability of the exchange rate which is more likely to occur if policy is certain may be more important than previously thought. In this light, the recent move to raise interest rates to prevent further slippage in the value of the euro, is a welcome action.