Questions tagged [exchange-rates]
the price at which one currency may be exchanged for another.
159
questions
4
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1answer
97 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 ...
-2
votes
1answer
34 views
Real Exchange Rate (Euro/Sterling)
What will be the real value of the Euro/Sterling exchange rate if:
Given that:
Index of UK prices$=118$, Index of Euro-area prices$=110$, Nominal Euro/Sterling exchange rate$=1.58$ and UK marginal tax ...
2
votes
0answers
31 views
Linearization around the steady state (Asset pricing application)
I am working through a linearization example from Colacito and Croce (2011). In the paper the following expression is derived:
\begin{align}
& (v^{i}_{c,t})^{\theta}=E_{t}[\delta e^{\Delta c^{i}_{...
0
votes
2answers
60 views
Microeconomic rationale for UIP (uncovered interest rate parity)
The key idea behind UIP is that as for all common financial instruments, the "law of no free lunch" should also hold for currencies. However it differs from traditional replication-based no-...
0
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0answers
20 views
How does the imposition of import duties affect the nominal and real exchange rates in the long term?
Let's assume that a country imposes an import duty on goods imported from abroad.
How will this change the long-term real exchange rate between domestic and foreign currencies? How will it affect the ...
1
vote
1answer
39 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 ...
1
vote
0answers
27 views
Exchange rate modeling using a system of ODEs
I am looking for a book that explains exchange rates, capital flows, reserves, trade balance using a system of ordinary differential equations.
An economist by the name of Muller-Plantenberg has this ...
-4
votes
1answer
94 views
Why is the US rating AAAA+ after they printed trillions of dollars out of thin air, and bailed out the US stock market? [closed]
When any other country tries to print, there's huge inflation, devalued currency, bad ratings from rating companies (mostly US go figure why?), interest rates increases. But why don't these happen to ...
0
votes
1answer
25 views
How do you read currency exchange rates in terms of domestic and foreign currency?
I am having some issues understanding how to read exchange rates.
E is the exchange rate
I read online that if we have for example E\$/€, then the base currency in this case is the dollar and the ...
0
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0answers
26 views
How to define world interest rate using IS-LM-BP diagram?
Can you suggest where is the world interest rate in the economy which has a positive current account and a financial account surplus, fixed exchange rate and relative capital immobility? The graph of ...
2
votes
1answer
55 views
How do transactions in different currencies work?
Very basic question but I have not much knowledge in this field so sorry:
Say I have a bank account and over the past year there were transactions in different currencies. I am guessing that a ...
0
votes
1answer
78 views
Math based proof for currency changes (microeconomics)
This isn't part of my homework but I am genuinely interested in the mathematical proof behind this question (this is my line of work currently). I tried to work through it but after 2 hours gave up. ...
0
votes
0answers
17 views
How does the central bank's purchase of the domestic currency lead to an increase in the domestic interest rate?
Consider the following scenario:
The Hong Kong Dollar has been pegged to the US Dollar since 1983. If, for example, the US tightens monetary policy by raising interest rates, this will cause ...
0
votes
0answers
12 views
With exchange rate parity, how do rates of return equalize?
Rate of return is equal to interest rate plus appreciation, is that right?
If so, say you have a deposit in Canada and you find that the expected rate of return is greater in Australia. The demand for ...
0
votes
0answers
13 views
Real Exchange Rate Cross Rate
I have to do a study to determine the real exchange rate . I've read about the purchasing power parity and the interest rate parity . I also found the cross rate formula and was wondering if the ...
0
votes
1answer
26 views
What are some currencies that are not pegged and fixed?
Are there any currencies that are not pegged to the dollar or euro and are purely fixed exchange rates?
0
votes
1answer
23 views
How are PPP, nominal exchange rates and inflation related?
This Forbes article discusses how changes in the market exchange rate can be used to estimate an inflation rate thanks to the principle of purchasing power parity (PPP).
Can someone distill this ...
0
votes
2answers
41 views
What does it mean if a country's exchange rate is said to be “overvalued”?
For instance, China's or Switzerland's currencies are often said to be overvalued.
0
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0answers
18 views
Calculate profit when trading between more than two goods
When trading two goods (or currencies) it is relatively easy to say if you are making profit when you know the exchange rates. For example Person A trades Bananas for Person B's Apples.
Person A gives ...
0
votes
1answer
41 views
Depreciation of local currency and its effect on prices
I have problem with an article Lee H., C. Park, 2013, International Transmission of Food Prices and Volatilities: A Panel Analysis.
Authors wrote:
Difference in log of exchange rates (LOC/ $)- As ...
1
vote
1answer
33 views
Forecasting quarterly EUR/USD exchange rate
My aim is to forecast the one-quarter ahead EUR/USD exchange rate. I have constructed a regression model with the following as explanatory variables: exchange rate in the previous quarter, EUR/USD ...
0
votes
1answer
25 views
Problem with interpretation of exchange rate
I found an article in which one of explanatory variable is "neer". From this article "The rise (decline) in this variable points to the appreciation
(depreciation) in excess of the appreciation of the ...
0
votes
1answer
29 views
echange rate from LOC/EUR to EUR
I have import values in LOCEUR (LOC is local currency).
How can I obtain these values only in EUR? My data are from Eurostat, where external trade indicator is "Exports in million of ECU/EURO"
-1
votes
1answer
43 views
Meaning of Exchange rate
Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?
1
vote
3answers
84 views
How long can I live in the United States with my German monthly income?
I see different (more or less abstract resp. specific) approaches to compare wealth (of individuals, regions, and countries):
by living standards
by living expenses
by incomes/salaries
by purchasing ...
1
vote
1answer
35 views
How to calculate PPP$ from LCUs?
Is there one single formula which allows to calculate the income of a person in PPP\$ from her income in LCUs (local currency units), given for example the PPP conversion factor, GDP (LCU per ...
1
vote
0answers
20 views
Meaning of PPP conversion factors
How do I interpret the numbers of this table PPP conversion factor, GDP (LCU per international $) as published by the World Bank:
First of all, it's just numbers, but what do they tell (in common ...
0
votes
0answers
43 views
Purchasing Power Parity and Baskets of Goods
On the exact definition and understanding of "purchasing power parity" it depends what it means when the World Bank defines
the “extremely poor” people of the world as those who are currently
...
0
votes
1answer
46 views
What strategies can the president employ to deflate the dollar
United States president Donald Trump has publicly declared a desire to deflate the value of the dollar. I have read in news reports that he has asked aids to find ways to decrease the dollar's ...
4
votes
1answer
753 views
Bretton Woods vs Gold Standard
I've been reading about the history of the IMF recently, and it strikes me as odd that despite the problems that arose with the gold standard (Germany in the 1920s, Fed cutting money supply during the ...
0
votes
1answer
36 views
Local vs. foreign currency denomination for Emerging Market Bonds
For emerging market governments, why is it safer to issue bonds in local currencies than in foreign currencies to raise money? Given that both are invested in by foreign investors, couldn't both ...
0
votes
2answers
84 views
How does interest rate impact exchange rate?
When I’m using the forward exchange rate formula based on non-arbitrage theory, it tells me that a positive interest rate spread (i_domestic > i_foreign)would cause the forward exchange rate(units of ...
1
vote
1answer
116 views
What is the difference between conditional and unconditional risk premia?
This is an asset pricing question. What is the difference between conditional and unconditional risk premia? Here's the context:
The fact that carry trade strategies typically earn positive average ...
0
votes
0answers
24 views
How the Balassa-Samuelson affect real exchange rate?
According to standard Balassa-Samuelson effect, when the productivity increases in the tradable sector (GDP), price increase can be observed in non-tradable sector and this can lead to appreciation of ...
-1
votes
2answers
57 views
Is the mid-market currency exchange rate something real? Or are bid and ask rates the real rates?
Reading from this and other sources, it appears to me that there are three different ratios between any two currencies, namely
the bid rate
the ask rate
the real rate
My understaning is that the two ...
1
vote
1answer
97 views
Facebook's Libra - Why would it vary in value
Facebook has come up Libra its version of crypto-currency.
The unique feature of Libra is the "reserve" which backs Libra. The reserve is supposed to be held in stable global currencies (USD, GBP, ...
-1
votes
1answer
193 views
What negative effects would result from globally fixing currency exchange rates?
Assuming one had the power to enact such a wide-ranging change, what would the negative effects of fixing the exchange rates between all currencies at the current rates, or the mean of the last week/...
1
vote
1answer
64 views
Questions about the gold standard and exchange rates
So I'm a total economics noob and I'm trying to understand some of the consequences of using vs. not using a gold standard listed on Brad DeLong's blog here: https://www.bradford-delong.com/why-not-...
0
votes
1answer
335 views
Balance of payments and the free floating exchange rate system
I am a beginner economics student and recently, I have been learning about how balance of payments surpluses are important for a country to control the value of its currency using its accumulated ...
0
votes
1answer
301 views
Why a current account surplus is bond to lead to an appreciation of a currency?
I have got some confusion in trying to explain why a trade surplus is going to lead to an increase in the exchange rate. The usual logic goes as follows.
Export X > Import M
Demand for the country's ...
1
vote
1answer
27 views
Does a strong exchange rate always mean a cheap holiday regardless of where you are from and going?
As question title states, does going from one country with a much stronger exchange rate, or a moderately higher exchange rate, in comparison to a country you visit always mean you get more bang for ...
-1
votes
1answer
79 views
why doesn't every country scale up the prices to the international level?
I live in an Asian country in which the average monthly salary is maybe 300-400 dollars but things (apart from exported goods like laptops or smartphones) are reasonably cheap compared to their price ...
0
votes
2answers
64 views
Question about maintaining fixed exchange rates
In my textbook, borrowing from abroad is listed as one of the method to increase the value of a currency by shifting its demand curve to the right.
"If the country borrows from abroad, its loans ...
1
vote
0answers
208 views
What does an increase in REER signify?
What does an increase in the real effective exchange rate signify? I read from a news report that (localized for India):
Furthermore, REER is calculated in such a way that an increase in its
...
1
vote
0answers
28 views
The Crisis of Argentina
newbie here.
Q1 - What needs to be done by the Argentinian government for their currency to regain back its strength?
Q2 - Why has the Argentine Peso depreciated against the U.S Dollar for more than ...
0
votes
2answers
64 views
How to convert an historic value denoted in foreign currency to a modern value in local currency?
I want to convert GBP in 1968 to USD in 2018, in order to "translate" an amount paid by an individual in Britain fifty years ago. My intention is that an American reader today will be able to better ...
1
vote
0answers
19 views
Exposure of two companies in a transaction involving an FX option
An American company $A$ has sold a manufactured product to a German company $B$, and they agree for the payment of 100,000 EUR in 1 year.
What type of exposure does $B$ have?
What type of exposure ...
1
vote
1answer
45 views
Justification for my Random Effects estimation
I need to defend my use of the Random Effects (RE) estimator in my economics project. I've been told in cross validated that the proper place for the question is here.
The causal effect of the ...
1
vote
2answers
36 views
Theory of Optimal Currency Areas
Should a country be more inclined or less inclined to join a currency union (common currency) under the following events:
a) Increase in the size and frequency of AD shocks to the economy.
b) Increase ...
1
vote
1answer
35 views
Real exchange rate
I have a doubt: I'm studying about real exchange rates and I'm having some problem with the formula.
RER= NER* price ratio
What I don't understand is how do you take this price ratio? Which price ...
