Questions tagged [exchange-rates]
the price at which one currency may be exchanged for another.
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Exchange Rate Determination
Most introductory international economics textbooks use the Uncovered Interest Rate Parity condition for deriving bilateral exchange rates. In other words, it is solely interest rate differential ...
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J Curve and DD Schedule in the Short Run (International Finance)
Assume that the J-curve is true. What would the DD curve look like during the early period of the J-curve (where the value effect dominates)? What would the effect of temporary changes in monetary ...
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1answer
23 views
How does imposing 100 percent cash margin requirement on imports help to stabilize foreign exchange reserves of a country?
My country is facing a critical depreciation of its currency's exchange rate and the central bank has introduced a 100 percent cash margin requirement on a selected set of imports.
My main problem is ...
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2answers
39 views
real exchange rate appreciation
i find the topic of real exchange rate appreciation / depreciation often not very well explained.
even the excerpt below from the following accepted answer on this website is not correct in my ...
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1answer
31 views
What could happen if a country changes their currency rate constantly?
Introduction
Imagine this random country. "Yolistan", it is a new country that appeared after a war/revolution/independence/whatever.
The currency it's the "Yolo"
Yolistan needs to import resources ...
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1answer
25 views
Emerging Market dollar debt, FX swaps and exchange rate risks
"An FX swap, on the other hand, creates no exchange rate risk for its counterparties. This is because currencies are sold and repurchase at fixed spot and forward rates. In other words, when you sell ...
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3answers
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What is the reason of devaluation in Turkish Lira?
I guess there is a some fundamental issues in the economy but I wonder the apparent reason of the recent devaluation in Turkish Lira?
Does Turkey need to pay debt in very short term? How much is it? ...
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0answers
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Dornbush model - relationship between i and S
In the Dornbush model, when we separate short and long run equilibrium. This is what I apparently have understood:
SR1: an increase in Money Supply ($M_s$) leads to a fall in domestic interest rates (...
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0answers
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Mechanics of Sterilized Intervention?
I'm looking to see if someone can help improve my understanding of sterilized intervention in FX markets.
My intuition/understanding is:
Assume that the domestic currency is depreciating, perhaps ...
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1answer
89 views
Can increase of NEER cause higher inflation?
I´m trying to find siutable econometrics model for explaining inflation during financial crisis and after. My final model shows that if NEERnominal effective exchange rate) increases, the inflation ...
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0answers
19 views
Is there a quantitative model demonstrating the relationship between balance of payments and exchange rate?
According to conventional analysis, a key factor in exchange rate determination is the state of the balance of payments.
An increase in imports gives rise to an increase in a demand for foreign ...
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1answer
21 views
Normalise historic values given in different currencies
I have historic monetary values given in different currencies and stemming from different points in time. I want to be able to compare them, and for that all must be given in the same currency, and ...
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1answer
29 views
Real exchange rate of India and United State?
According to OECD the price level of India is 29, and that of united states is 113, and nominal exchange rate is 64-1(INR-$). So what is the real exchange rate?
Is it $$RER = NER\times\frac{US_{...
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3answers
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How is it possible that all currency exchange rates are fixed w.r.t. to each other?
I wondered if it would be beneficial to exchange a currency through one or more "in-between" currencies.
For example: instead of trading Russian Ruble (RUB) to Euro's (EUR), one would trade from RUB ...
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2answers
124 views
Dornbusch Sticky Price (Overshooting) model
Stupid question: What do the phi and lambda from the equations above represent?
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0answers
153 views
Why is the LM curve vertical in the open economy Mundell Fleming model in the short run?
We assume that the quantity of real money balances demanded is L(r, Y), where r is fixed in the case of a small open economy with perfect capital outflow, Y is income. As a result, e, the exchange ...
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3answers
108 views
Theoretical market capitalisation of a crypto currency?
Here’s the context. I want to know what the theoretical market capitalisation (say eg $US / Bitcoin times Q the number of coins - it doesn’t have to be Bitcoin) of a crypto currency? Assume that the ...
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2answers
2k views
Who determines the exchange rate and how?
I have almost no knowledge about economics. However, a question always comes in my mind. How exchange rate really differ? I live in Bangladesh. So how, why, who changing BDT and US Dollar exchange ...
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National Capital Outflow Question
I have the following example for an imposed quota on the importing of Japanese cars to Europe and it's relative effects:
I am told that $NX=NCO$ (Net exports are equal to National Capital Outflow). I ...
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Do trades in foreign currencies appear differently from trades in domestic currency on the on the BoP?
Is there any difference in the way the 2 scenarios below are expressed on the US's BoP?
...
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1answer
56 views
Solutions for the de-dollarization of the Democratic Republic of Congo
While reading this article, I was wondering about the policies the DRC's government could employ to make the congolese franc appreciate. To appreciate the currency, the DRC by decreased investment in ...
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0answers
86 views
Under what conditions are tariffs or export subsidies expansionary?
Charles Kindleberger writes in the introduction to /The World in Depression/:
The imposition of tariffs should be expansionary for the importing country, if contractive for the countries losing ...
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2answers
423 views
Data on bilateral real exchange rate
Where can I find bilateral real exchange rates? For example per USD?
I can only find real effective exchange rates, but it is an index, not a bilateral rate.
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1answer
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Norway inflation and exchange rates
I am looking at Norway's economy, and I'm trying to make sense of some of the data I see. Norway's economy has a very close relationship to crude oil, and in 2014 crude oil had a massive drop. Looking ...
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1answer
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How can the HKMA peg the Hong Kong dollar at 7.8 HKD/USD for so long?
A lot of pegged exchange rate systems don't stay pegged for so long (e.g. because the central bank run out of reserves to maintain their values)
So far I understand that the HKD is 100% backed by the ...
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3answers
44 views
How to estimate long term exchange rate?
I'am looking for a book or paper that explain (in a theoretical and empirical way) how to estimate the long-run exchange rate for a country. Could someone suggest me one?
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In this 3-way currency exchange, who loses, and by how much?
Let's say, hypothetically, we have the following imbalanced exchange rates:
1USD = 1.2EUR
1.2EUR = 1000 JPY
1000 JPY = 1.5 USD
Let's say person A starts off with 1 USD, buys 1.2 EUR from B, then ...
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1answer
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Why imports increase if higher relative inflation?
I'm reviewing a previous AP Macroeconomics exam and I saw the following question:
The United States and South Korea are trading partners, and the United
States has a zero current account balance. ...
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1answer
33 views
Is there an accepted metric for “the value of the dollar”?
Is there a reasonably well-established scheme for estimating the value of the dollar in international trade, somehow relating it to the "average" of other currencies or to some currency-independent ...
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0answers
40 views
Relationship between Fixed exchange rate and balance of trades
I wanna find a relationship between the fixed moroccan exchange rate and balance of trade and some other variables like international reserves , what type of regression should i use ?
thanks in ...
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1answer
314 views
Real Exchange Rates calculation
I am struggling with something as simple as real exchange rate calculation!
I get the theory: RER = NOM * (P*/P) i.e. nominal exchange rate times price level ratios. Apparently, using CPI (consumer ...
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0answers
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Can one calculate how much increasing the US federal debt affects the “value” of the dollar?
As I understand it, if the US government runs a deficit then it (for the most part) "pays" for that deficit by "selling" government bonds. This tends to drive up interest rates somewhat, but also, ...
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0answers
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VAR/VECM Fitted/Predicted values (BEER model)
I am running a BEER model (Behavioral Equilibrium Exchange Rate Model) and using VAR/VECM and Johansen method to estimate the equation. For context, I am looking at the XR of Czech crown and the euro.
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Why should UIP hold?
I am aware of the details of Uncovered Interest Parity, namely that the expected depreciation of a currency vs another one should equal the interest rate differential. I am also aware that empirically ...
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0answers
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What could cause the spike in the Venezuelan unofficial currency exchange?
In November last year the unofficial currency exchange rate in Venezuela skyrocketed. It was only one month later that the government was able to slow the increase rate to “normal” values. The ...
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1answer
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Do import tariffs tend to increase a country's exchange rate (if so, why)?
From Prof. Stiglitz' Vanity Fair article:
How, one might ask, is this possible, given Trump’s rhetoric, his
determination to move against China with a 45 percent tariff? There’s
a global ...
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1answer
393 views
How should I adjust data for both inflation and foreign exchange rate?
I’m not sure if this is typically done, but suppose my data point is in 2013 JPY and I want to express in 2016 USD. Do I apply CPI to express data in 2016 JPY, and then apply exchange rate to 2016 USD?...
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1answer
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What is the proof for why border adjustments are exactly offset in theory by currency appreciation?
Why is it true, in theory, that border adjustments are exactly offset by currency appreciation? I've read the colloquial explanations online, but am looking for something more rigorous.
For example, ...
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is trading JPY like launching rockets?
Forgive for my vague question, but my impression of JPY pairs is, that the volatility in them is immense and, as such, it is difficult to make mistakes if you buy JPY when it is low and sell when it ...
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0answers
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What keeps the EUR in check versus CHF?
I'am a newb in economy and currencies, so forgive my naive question. From what I read here and elsewhere, the Swiss are happy when EUR is worth more than CHF. This brings in tourists and they can sell ...
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2answers
1k views
Is there a difference between buying a currency and selling the currency to be converted to?
I'm not an economist. I'm looking to exchange my CAD to EUR. I watched the rates on a exchange office, and I found something strange:
...
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1answer
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Do the stock performances of various companies have a measurable correlation with exchange rate?
For example if the values of big companies in a country decrease, will the value of that country's currency measurably decrease?
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0answers
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Relationship between changes in Currency against basket of currencies and inflation
Sorry I'm not an economist, but I was wondering if there was a general country by country guide to how inflation there changes with response to a change in the currency's value against a basket of ...
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2answers
260 views
Interest Rate Differential and Fisher's Interest Rate Parity
The Fisher formula for interest rate parity, as explained here shows that for a given currency pair, the currency with the higher interest rate will depreciate relative to the the currency with the ...
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1answer
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Did the dollar depreciate when Trump won the election?
I expected the the dollar to briefly depreciate against all currencies when Trump won the election (in 2016), but I have just learned that it briefly appreciated against some. It depreciated against ...
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1answer
765 views
What exactly is the difference between the PPP (“purchasing power parity”) and LOOP (“law of one price”)?
For PPP & LOOP: e = EP/P* = 1
So both are valid if goods in the US and EU cost the same in $ for example.
But then, what exactly is the difference between both?
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0answers
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Who loses/wins in exchange rate fluctuations?
I recently joined Amazon prime unknowingly and USD99 was debited on my non-USA credit card for an annual membership. I canceled the membership and was refunded USD99 after two days. Due to exchange ...
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1answer
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The effects of Quantative Easing (QE) on FX rates?
What are the effects of quantitative easing on the foreign exchange rates?
If the central bank starts buying debt denominated in domestic currency, I would think that the market would be flooded ...
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1answer
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Renminbi demand and CNY rates
I read something similar to here, http://www.businessinsider.com/onshore-and-offshore-renminbi-2014-2?IR=T, paragraph 6, that demand for renminbi drives down cny bond market?
I can understand how ...
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1answer
264 views
Short term and long term price elasticity of currencies
If I have 1% of the world supply of US dollars, and I decide to sell all of them to buy Euros, how much should I expect the exchange rate to change? Is there some kind of empirically determined price ...
