Questions tagged [exchange-rates]

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

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8
votes
2answers
2k views

What would happen if the world switched to a single currency?

What would happen if all countries suddenly stopped using local currencies and adopted a global currency (like the Euro, but for everyone)?
6
votes
1answer
855 views

Interest rate parity: Counter intuitive

What is the basis for interest rate parity to hold? I know, the reason stated is excess returns Excess returns as such should not be the reason for a currency depreciation. for e.g. when we posit ...
0
votes
3answers
126 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 ...
15
votes
3answers
18k views

Real Exchange Rate vs PPP rate

I'm having troubles to understand the difference between the Real Exchange Rate and the PPP rate. I know the first one is calculated using a basket of goods and services so that the non-tradeable ...
5
votes
2answers
444 views

Why was Swiss National Bank in red by keeping fix exchange rate to Euro?

When I read news about the action of Swiss National bank of not keeping fix ration to Euro any more, I read in all articles, that it was too expensive for Swiss National Bank to keep the fixed ...
4
votes
1answer
2k views

Nominal GDP versus PPP in comparing military spending of different countries?

Military spending as percentage of GDP is the most used measure of the economic capability of a certain country/military. But Some countries like India for example, have a huge difference between ...
3
votes
1answer
305 views

Changing the base year of Real GDP from 2001 Euros to 1990 Geary–Khamis dollars

Estimating regional Gdp in Italy (1871-2001): sources, methodology, and results (Felice, E) This article has Italian historical regional GDP figures, but they are in constant 2001 euros not in 1990 ...
11
votes
5answers
20k views

How does a country devalue its currency?

I recently read an article in the New York Times that talked about China devaluing its currency (which I believe is held to a peg against the US Dollar). My question is: specifically what tools does a ...
9
votes
1answer
198 views

How does a bank convert one currency to another?

Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account? Does the bank require some sort of USD cash reserve? How do ...
9
votes
3answers
2k views

What are the differences between the older gold standard and the current fiat money standard?

My current limited understanding is that the gold standard was a system in which there was a fixed currency amount per unit of gold. For example, 1 ounce of gold might be 100 USD. Another country like ...
3
votes
1answer
520 views

Why New Zealand dollar keeps falling against USD and other currencies?

New Zealand seems to have strong economy and governed well by the RBNZ. Agreed that recent decrease in the dairy prices globally has some negative effects on the economy. But with the large service ...
1
vote
1answer
87 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 ...
5
votes
1answer
13k views

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 ...
4
votes
1answer
343 views

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 ...
2
votes
3answers
3k views

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? ...
1
vote
1answer
888 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?...