The title is more inflammatory than I want it to be, but I can't think of a simple way to ask the question properly. And it is a genuine question, because I don't know how they construct GDP data for Eurozone countries. And I know there's no chance I will be able to figure out the answer by myself from reading the Eurostat methodology footnotes. And I don't know what data macroeconomists are using. And I never was that good at national income accounting anyway. I'm trying to get my head straight on this. That's why I'm asking. Because I'm muddled, again.
Suppose Statistics Canada only reported Canadian GDP measured in US dollars. So every time the exchange rate appreciated or depreciated by 1%, Canadian GDP would jump up or down by the same 1%, even if Canada was producing exactly the same quantities of goods and services as before. But everyone would agree that those fluctuations in Canadian GDP, measured in US dollars, were "fake".
And suppose the Canadian government tightened fiscal policy a lot, just like it did in the 1990's. And suppose this caused the exchange rate to depreciate a lot, just like it did in the 1990's. Would everyone say: "Oh look! Canadian austerity caused a big drop in Canadian GDP, which proves that fiscal policy has big effects!" ? Or would they say "That drop in Canadian GDP is fake, and Canadian GDP, measured properly, did not fall. Because the Bank of Canada loosened monetary policy to fully offset the tighter fiscal policy, so the exchange rate depreciated, and Canadian inflation stayed on target."?