Questions tagged [exchange-rates]
the price at which one currency may be exchanged for another.
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IS-LM : monetary policy in SOE that exports inferior goods
If I follow the IS-LM model (or some derivative of it), a small open economy can really only use monetary policy to change GDP in the short term.
According to the model (or one of its spin-offs), if ...
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14 views
Effect of import quota on NCO, NX
I'm studying loanable funds from the book "Brief Principles of Macroeconomics, 6th ed". On page 307, the effects of an import quota are explained below. It said the net export rises, but NCO ...
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1answer
48 views
The impact of a devaluation of the national currency under a fixed exchange rate system
I would really be thankful if any of you could check my answer to the following question.
Question:
Describe, using the IS-LM-BP model, the impact of a devaluation of the national currency under a ...
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0answers
26 views
Relationship between stock market and exchange rate
I am looking for some references on the relationship between the stock market and the exchange rate, both from the empirical and theorical side.
Is there any theory which suggests a relationship ...
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0answers
27 views
Shifts in IS in a fixed exchange rate mechanism
First, we assume we are in a fixed exchange rate mechanism. In this system, I deduce that the expected exchange rate would be fixed, at the market rate.
In a floating system, with open capital markets,...
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34 views
calculation of the real domestic return of a foreign stock
I would like to calculate the real domestic return of a foreign stock
What I know
Real price is $$P_{Real, t} = \frac{P_{Nominal, t}}{CPI_t}$$
where CPI is consumer price index.
And I know that the ...
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1answer
41 views
Why would foreign asset purchases by PBOC temper yuan appreciation?
Suppose the PBOC buys a bunch of dollar-denominated bonds, using its dollar reserves. All else equal, what effect should this have on the yuan-USD exchange rate? And why? It amounts to trading non-...
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1answer
36 views
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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17 views
Convert data in current US dollars to constant international dollars (PWT)
I would like to convert a nominal GDP series in US dollars to real GDP at constant PPP using Penn Wold Table (PWT) version 10.0 (see here).
So far, I managed to get the real GDP at current PPP. Using ...
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0answers
17 views
Effects of a decrease of the policy rate on net exports
We've recently worked in class with the IS-LM-UIP model (where UIP stands for the uncovered interest rate parity). The central bank chooses the policy rate. Hence, the LM curve is horizontal. The IS ...
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1answer
19 views
Dynamics of interest rates, exchange rates and bond prices within the UIP
There are already a few questions about the workings of the UIP and the exchange rate. What I have basically taken from those discussions is that one always has to distinguish between the spot rate ...
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42 views
Does locking donations on an account for an extended amount of time (50 years) make sense?
Let currency C be a reward proportional to amount of carbon offsets (or any other social good).
I am trying to invent a way to reward (to stimulate social good) holders of this currency.
Let M be &...
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59 views
Value of Mexican Peso vs US Dollar in 1920s — is silver content complete determiner?
I am rewatching The Treasure of the Sierra Madre which is set in Mexico in 1925 and they seem to use the term peso and dollar interchangeably -- for example, the trio of prospectors need another 100 ...
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1answer
213 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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1answer
39 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 ...
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0answers
34 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}_{...
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2answers
99 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-...
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1answer
54 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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0answers
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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 ...
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1answer
105 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 ...
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1answer
221 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 ...
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43 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 ...
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1answer
60 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 ...
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1answer
127 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. ...
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0answers
17 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 ...
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1answer
33 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?
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1answer
30 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 ...
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2answers
661 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.
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1answer
53 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/ $)- As ...
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1answer
36 views
Forecasting quarterly EUR/USD exchange rate
My aim is to forecast the one-quarter ahead EUR/USD exchange rate. I have constructed a regression model with the following as explanatory variables: exchange rate in the previous quarter, EUR/USD ...
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1answer
27 views
Problem with interpretation of exchange rate
I found an article in which one of explanatory variable is "neer". From this article "The rise (decline) in this variable points to the appreciation
(depreciation) in excess of the appreciation of the ...
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1answer
35 views
echange rate from LOC/EUR to EUR
I have import values in LOCEUR (LOC is local currency).
How can I obtain these values only in EUR? My data are from Eurostat, where external trade indicator is "Exports in million of ECU/EURO"
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1answer
105 views
Meaning of Exchange rate
Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?
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3answers
87 views
How long can I live in the United States with my German monthly income?
I see different (more or less abstract resp. specific) approaches to compare wealth (of individuals, regions, and countries):
by living standards
by living expenses
by incomes/salaries
by purchasing ...
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1answer
58 views
How to calculate PPP$ 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 ...
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0answers
26 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 ...
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0answers
50 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
...
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1answer
52 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 ...
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1answer
2k 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 ...
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1answer
39 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 ...
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2answers
132 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 ...
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1answer
334 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 ...
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0answers
25 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 ...
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2answers
63 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 ...
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1answer
131 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, ...
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1answer
198 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/...
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1answer
120 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-...
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1answer
464 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 ...
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1answer
721 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 ...
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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 ...
