Questions tagged [exchange-rates]
the price at which one currency may be exchanged for another.
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questions
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1answer
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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
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 ...
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0answers
12 views
Real Exchange Rate and PPP [closed]
I'm struggling to answer this question. *Consider the real exchange rate. Suppose that the nominal exchange rate is 30, which is 10% lower than the level predicted by the absolute PPP. Answer how much ...
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0answers
9 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 ...
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0answers
10 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
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?
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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 ...
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2answers
24 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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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 ...
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1answer
26 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/ $)- As ...
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1answer
32 views
Forecasting quarterly EUR/USD exchange rate
My aim is to forecast the one-quarter ahead EUR/USD exchange rate. I have constructed a regression model with the following as explanatory variables: exchange rate in the previous quarter, EUR/USD ...
0
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1answer
25 views
Problem with interpretation of exchange rate
I found an article in which one of explanatory variable is "neer". From this article "The rise (decline) in this variable points to the appreciation
(depreciation) in excess of the appreciation of the ...
0
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1answer
25 views
echange rate from LOC/EUR to EUR
I have import values in LOCEUR (LOC is local currency).
How can I obtain these values only in EUR? My data are from Eurostat, where external trade indicator is "Exports in million of ECU/EURO"
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1answer
38 views
Meaning of Exchange rate
Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?
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3answers
81 views
How long can I live in the United States with my German monthly income?
I see different (more or less abstract resp. specific) approaches to compare wealth (of individuals, regions, and countries):
by living standards
by living expenses
by incomes/salaries
by purchasing ...
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1answer
27 views
How to calculate PPP$ 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
19 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
40 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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0answers
31 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
199 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
27 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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1answer
63 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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0answers
54 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
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0answers
11 views
What counts as a “dollar shortage” and how do we know which countries have one?
I recently read an article claiming that China is worried about a possible "dollar shortage," which is news to me. When does this happen, has it happened before, and how do we know which countries ...
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0answers
22 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
56 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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0answers
5 views
Why would QE tapering depreciate a foreign, volatile currency?
I'm busy reading the overview in The Oxford Companion to the Economics of South Africa (written in 2014), and on page 11 it says
The rand is expected to remain volatile and face depreciation risk ...
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1answer
89 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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0answers
29 views
Uncovered Interest Rate Parity Assumptions (UIRP)
When learning about UIRP i have naturally come across the assumptions under which it may hold. However i am having trouble understanding the role of these assumptions and what the actual consequences ...
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0answers
14 views
Exchange rate target zone 45 degree line in the free float case - Krugman Target Zones
As far as i understand in the Krugman target zone model the following equation describes the behaviour of the exchange rate within and outside a target zone $s_t = f_t + \alpha E_t(ds_t/dt)$. But if ...
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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/...
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1answer
48 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
229 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
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1answer
227 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 ...
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1answer
56 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 ...
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2answers
53 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 ...
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0answers
149 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
...
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0answers
27 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 ...
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2answers
56 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 ...
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0answers
18 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 ...
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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 ...
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2answers
33 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)...
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1answer
34 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 ...
0
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2answers
56 views
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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0answers
112 views
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
78 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
2k 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
64 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
32 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 ...
