Questions tagged [currency]

a generally accepted form of money, including coins and paper notes , which is issued by a government and circulated within an economy.

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If a poorer country's currency appreciates equal to the dollar would their minimum wage decrease?

Currently $1 = 31.5 Thai baht, and Thailand has a minimum wage of 336 Thai baht/day (42 baht/hr). If the baht appreciates to the point where it is $1 = 1 baht would that 42 baht/hr minimum wage ...
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How was sulphuric acid used to back money?

I remember reading in a economics and history book that sulphuric acid production was used as an alternative to gold standard as the basis of the value of currency due to it’s importance in making ...
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43 views

Are there any notable exceptions to the Impossible Trinity theory?

I am referring to the theory presented on Wikipedia and The Economist that states: The impossible trinity (also known as the trilemma) is a concept in international economics which states that it is ...
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37 views

Does it make sense to talk about Bitcoin 'inflation' when little to no goods and services are listed in Bitcoin currency?

I think of inflation as a generalized increase in the price levels of a basket of goods and services. I should add that my understanding presumes that inflation should be measured in the same currency ...
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Why GDP is converted to 2010 $US constant in international studies?

GDP is a widely-used macro control variable in finance-related papers, especially for international studies. I am wondering what is the reason why GDP is converted to $US 2010 as noted by WorldBank. ...
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Is modern monetary theory sustainable?

I am looking around at a lot of the central banks around the world (primarily ECB, Fed, and BOJ) and they all seem to be simply printing their way out of any issues with their economies. As far as I ...
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27 views

Why the stock market went up when the currency being weakened?

From Bloomberg Market Concept (BMC), in 2013, Japan is traditionally a heavy exporter, especially automobiles. When the yen being weakened, the Japanese automobile being more attractive because it ...
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Inter country currency exchange [duplicate]

This is probably a stupid question as I don't know much about economics, please bear with me. My question is; why can't a country insist on the worth of their currency relative to the dollar. For ...
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Does a high current account deficit devalue the national currency?

I've been reading some materials about Belarus's 2011 financial crisis, and a common thread among them is this: Belarus had had a rapidly growing current account deficit, and in 2011 it came to a head ...
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Comparing Real GDP with different base years and currencies

I have a quarterly panel data of several countries. I have taken the data from Fred. Some countries' real gdp is in chained 2010 prices and some in other years (such as 2015 and 2018). How can I make ...
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FX - Reconciling monetary policy and interest rate parity

Theory suggests that as rates rise domestically, the home currency (call it currency A) will appreciate against currency B (all else equal). What we see with currency forward rates though seems to be ...
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How does one country peg its currency to another's? [closed]

For example, Belize has pegged its currency to the US dollar at an exchange rate of 2 Belize dollars to 1 US dollar. How does Belize do that?
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Why isn't high inflation along with robust welfare a 'good' system?

High inflation, by definition, means that the demand for goods and services is higher compared to the demand for currency. In other words, people are more willing to give up currency for goods and ...
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Are financial markets “unique” for each “currency pair”, or are they simply “translated”?

This is something I've been long wondering about. Let's say that I have statistics showing the daily closing Bitcoin price in USD since early 2009. Great. Now, if I wanted to get the daily closing ...
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Creating a pragmatic, useable (not theory heavy) proxy for a currency basket for a set of economies

This is currently, a gedanken experiment, but may well form the basis of a whitepaper - or better still, an actual project. I am trying to come up with a practical way of creating a "currency ...
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18 views

Big Mac Index based on other products or services?

The Big Mac Index compares the cost of a McDonalds Big Mac in different currencies around the world. In doing so, it provides: an informal way of measuring the purchasing power parity (PPP) between ...
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112 views

What are the advantages of using euro for Greece?

Theoretical benefits of using unified currency are well known and described in many places like https://www.economicshelp.org/europe/benefits-euro/ However, reality (or more comprehensive analysis) ...
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What is the effect of currency depreciation on import prices?

In Macroeconomics: A European Perspective (3rd ed., Blanchard, Amighini and Giavazzi), when discussing the reason for differences in the GDP deflator and the HICP for the EU, it states the following ...
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Why doesn't Dollar exchange rate go down?

I am from India and my question is related to conditions based in India which may be applicable to other countries as well. Dollar value is gradually rising in India. I was trying to understand why. ...
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37 views

Currency and GDP

USA's GDP (at this time) is ~21 trillion dollards, and UK's is ~2.8 trillion dollars, then how come UK's currency is more than USA's. By that I mean, 1 GBP gets you more than 1 USD.
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Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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112 views

How can a currency be tied to a commodity like energy?

To make a stable (crypto)currency it basically needs to be tied to a thing of value that can not be just flooded onto the market with minimal effort. I think energy is the ideal thing to tie a ...
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Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

Governments engage in the optical illusion of taking on debt against issued currency. The debt is effectively owed by the Government to itself. The value of the debt is completely controlled and ...
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Oliver Hart said that financing deficits by printing money can lead to hyperinflation “once the economy is close to full capacity”. What does he mean?

In response to a poll on Modern Monetary Theory, Nobel Laureate Oliver Hart said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation ...
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47 views

For stability, is there a limit to the sovereign debt that a Government owes to itself against issued fiat currency?

Looking beyond the optical illusion of Governments owing debt to Central Banks, Governments effectively owe themselves the sovereign debt created against issued fiat currency. By definition, there ...
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Can banks 'create' money on their own or do they need help from other banks?

My current understanding of the banking money multiplication process goes as follows: Alice comes along and deposits 100 cash into Bank A. Bank A gains 100 in vault cash (reserves) as an asset and 100 ...
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Is it theoretically possible for a singular national currency to exist under a free banking system?

Free Banking is a proposed monetary system, usually by Austrian Economists, as an alternative to the prevalent Central Banking system. Under this arrangement, commercial banks would issue their own ...
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451 views

Is there any pressure to keep currency exchange rates around 1?

I notice that for any pair of currencies, the exchange rates seem to stay around 1 (as opposed to, say, 1,000,000). This is no longer the case if one country experiences an economic crisis that ...
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How digital currency (like Bitcoin) proponents solve the problem of its high volatility to make it a good candidate to replace fiat?

I have recently read an article about a family living with no fiat currency for several years. Indeed there are lots of advantages of using a digital currency. I am wondering if having an important ...
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32 views

Why does Bimetallism require international cooperation to have a chance at succeeding?

I was reading the Britannica encylopedia's article about Bimetallism and under the arguments put forth against it, they cite that bimetallism doesn't work without international cooperation. Could ...
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What happened to the Zimbabwe cash dollar after the introduction of Dollarization?

Let's say, before dollarization, I owned 1 million Zimbabwean dollars in cash and the next day dollarization went into effect. So in dollarization, the current Zimbabwean dollars will be invalid and ...
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Why does the United States have a fungible currency?

Given all the problems of money laundering and black market money entering the market why does the US have a fungible currency at all? If I put my totalitarian hat on it would make sense for every ...
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381 views

On what basis, is currency created?

This is more like a homework question. I am quite a beginner. I would appreciate any help, preferably with less technical terms, that guides me in the right direction. I went through the Wikipedia ...
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195 views

Demand Curve of Foreign Exchange

My high-school Macroeconomics textbook states that 'There is an inverse relationship between the price of foreign currency, or exchange rate, and demand for foreign exchange. When the exchange rate ...
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135 views

Why did the pound sterling lose its reserve status to USD?

Why did the pound sterling lose it reserve status to USD? Was this due to some agreement during the Bretton Woods negotiations?
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Famous recent paper on monetary Unions

do you know any (theoretical or empirical) recent famous paper about monetary unions ? I heard that topics like "monetary unions at ZLB" or "fiscal coordination during crisis time" ...
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Log deviation from steady state - understanding a journal paper

I hope a question like this is fair game on this website! I'm doing some research for my thesis, and have come across what seems to be a pretty simple model - two countries, A (representing the USA) ...
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Could eliminating all taxes and only creating new money theoretically work?

Imagine you had the opportunity to found a new country from scratch (in 2020). Value exchange would be digital, where only the state can create new currency units. Instead of relying on income tax ...
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Can the U.S print infinite money? [duplicate]

I know that a country can't simply print money to pay debt, since it would only lower the value of the money, i. e. cause inflation. But what about the U.S? Since their new printed money is very ...
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If Lebanon has a shortage of dollars, are USD donations meaningless?

I was reading about the dollar crisis in Yemen the other day, which mentioned that even people who owned dollars couldn’t withdraw them. If the situation with Lebanon’s currency is similar, what ...
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Why does a current account deficit contribute to making a country a “sitting duck” for currency speculators?

George Soros had this to say about the factors surrounding his famous short of the British pound: The U.K. had a large current-account deficit…, modest FX reserves and no capital controls to rebuff ...
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What's a “relative pair trade” for currencies?

Is the U.S. Dollar About to Crash? – Pairagraph The way I see currencies is that they are a relative pair trade. Against gold, with its stability characteristics, I don't like the US dollar. But ...
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Is Currency Devaluation a cause or effect of interest rates?

I understand that Federal bank/Goverment can manipulate the currency market and devalue its currency by printing more money or buying foreign currencies/assets (essentially increasing the supply of ...
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In today's money, what was the value of a 1492 Spanish maravedí?

Satava (2007) estimates that the costs of Columbus's 1492 voyage was 1,765,734 maravedís. In today's money, what was the value of a 1492 Spanish maravedí?
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Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?

As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to ...
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123 views

How exactly does QE affect the value of the USD?

A lot of people on the Internet refer to quantitative easing (QE) as a form of "legal money printing" when it is actually not. As such, many of these folks would thus erroneously say that QE leads to ...
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What is the effect on GDP when foreigners buy lots of domestic bonds?

I am trying to figure out the effect on GDP of foreigners buying lots of domestic bonds. From what I understand, when foreigners buy lots of domestic bonds: They need to convert their foreign ...
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How does the Monetary base, Narrow money and Broad money affect inflation?

In a lot of countries (e.g. Hungary) the M0, M1, M2 and M3 all doubled, tripled or even quadrupled in the past 10 years. How does this directly affect inflation? Since just because M2 doubles, it ...
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59 views

What are the benefits of reducing zeroes from currency (eg: Iran)?

Recently, Iran decided to replace its old currency to a new one. Quoted from Wikipedia A proposal has been agreed to by the Iranian parliament to drop four zeros, by replacing the rial with a new ...
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52 views

Does inflation/expected inflation in a given country devalue its currency or increase its value?

I've seen both arguments. From my understanding an increase in the rate of inflation should decrease the value of the currency since it's by definition a depreciation in its purchasing power. But I've ...

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