5/8

I found this example of Frieden’s theory in action. The article states that “many investors have shifted to the pound,” showing that they may have put aside concerns about the stability of exchange rates that is generally so important to international investors in exchange for the ability to make cheaper international purchases (Frieden 260). The danger here is that the future devaluation of the pound puts these investors at high risk in the long run.

This is “good for UK shoppers” because the purchasing power of the pound is much greater than that of the dollar, euro or yen. Ultimately, imports are cheaper than domestically produced goods and because England is a relatively small nation with a high percentage of imports, this means good news for UK consumers. Exporters, on the other hand, are hurt because other nations will be reluctant to buy their products at the increased effective cost that the exchange rate causes.