Michael T. Belongia and Werner Hermann analyze the distinct experience of one central bank pursuing an exchange-rate objective. In the first part of their article, Belongia and Hermann review the economic theory that relates monetary actions to movements in the real exchange rate. After concluding that the effects, if any, will be short-lived, they investigate how actions by the Swiss National Bank, relative both to the Federal Reserve and German Bundesbank, have affected the Swiss franc/dollar and Swiss franc/DM real exchange rates. Their results indicate that a central bank can influence real exchange rates only for a period of months; moreover, a predictable response will occur only with regard to the one bilateral rate that receives highest priority as a policy objective.