Questions tagged [exchange-rates]

the price at which one currency may be exchanged for another.

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1answer
35 views

Do exchange rate indicate richness/poorness of a country

Suppose there are two countries, A and B and if 1 unit of currency of A = x units of currency of B And x>1 does that mean that country A is richer or people are well off there?
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Foreign exchange rates negative hypothetical scenario

Assuming Hypothetical scenario of foreign exchange rates between two countries as negative, Is this scenario possible in which circumstances and what could be the reasons for this scenario? Examples :...
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How are the rates between two currencies (fiat and cryptocurrecies) determined? [duplicate]

How are the exchange rate between two countries determined? For example how is exchange rate between the dollar and the euro established? My guess is it has to do with some form of demand/supply but I ...
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1answer
31 views

If the BOP is always equal to 0 then why would a trade imbalance cause currencies to fluctuate?

I am a bit confused in interpreting the correlation between a trade deficit/surplus & currency depreciation/appreciation. Considering BOP always equals 0 and a outflow in the current account is ...
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1answer
25 views

What are the main causes of disparity between nominal and PPP exchange rates?

(I'm not a student of economics and I have no idea about correct terminology and things. ) I've seen the acronym "PPP" in various places for a long time, but it's only recently I became ...
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32 views

Deflating value series in currency A with CPI based on prices in currency B?

Say we have time series data on the annual value of imports in the UK from the US (in US dollars). Would it be appropriate to deflate the latter using the UK Consumer Price Index (which is based on ...
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13 views

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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16 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
49 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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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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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
51 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
37 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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20 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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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
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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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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
233 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
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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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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
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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
56 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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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
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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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300 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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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
62 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
130 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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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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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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795 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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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
38 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
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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
45 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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122 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
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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
68 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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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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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
64 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
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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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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
389 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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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
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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 ...