ABSTRACT
This chapter presents an analogy to explain in a simplified way the meaning of the exchange rate adjustments. A change in the exchange rate can be compared to shifting gears on a bicycle. The eurozone countries can be imagined as a group of people who have set out on a trip of several days on single-speed bicycles. However, when the group has to go uphill, some cyclists have problems, and instead of riding, they have to walk their bikes. Fierce discussion arises within the group. Some participants say the problem is that they have bikes without gears. Others say the problem is that some cyclists didn’t get in shape for the trip. The absurd dispute between the riders recalls some of the discussions among the members of the eurozone – and shows both the potential and the limits of proposed solutions to their problems.
