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Questions tagged [exchange-rates]

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

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2answers
123 views

Doubt in understanding the advantages of Fixed Exchange Rate

The author of my book writes: ADVANTAGES OF EXCHANGE RATE If exchange rates are fixed, then inflation may have a very harmful effect on the demand for exports and imports. Because of this, ...
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1answer
1k views

Converting a GDP series to constant international dollars

I want to convert a GDP series (I have it in current euros) of a country to constant 2005 international dollars. My idea is to divide the series by year 2005's $PPP$ conversion factor (the exchange ...
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504 views

Why currency purchasing power is linked to confidence in central banks

From the New Statesman, http://www.newstatesman.com/politics/economy/2016/02/coming-storm, "Ever since the collapse of the Bretton Woods system of pegged exchange rates in 1971, the sole guarantee ...
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393 views

Effect of positive inflation shock on the exchange rate

How does a positive inflation shock affect the exchange rate? Does the exchange rate appreciate or depreciate? I am looking for an intuitive explanation.
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95 views

Why is devaluing your currency good for exports?

I have the typical answer: "A cheaper currency means exports will go up because it's cheaper to buy from us!" Yeah, sure, but that's obviously full of holes. Let's have a simple situation: We have ...
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1answer
6k views

Uncovered Interest Parity (UIP) condition approximation

Until otherwise $e=\frac{\text{Domestic currency}}{\text{Foreign currency}}$. The UIP condition can be written in the following form: Investing now in a domestic bond, must give the same return as ...
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45 views

How rate rise by the Fed, higher than market expectation will lead to strengthening of Dollar?

If the Fed follows through on its forecasts, though, and raises rates faster than markets expect in 2016, the dollar may well rise further, dampening inflation quickly From : http://www.economist.com/...
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1answer
6k views

How does an import quota affect the demand / supply of currency?

An import quota in an open economy might not have the desired affect of increasing the GDP as it increases the demand of domestic currency in the open market raising exchange rate. How does it happen ...
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2answers
38 views

Why Chinese exports increased even though Yuan appreciated after the Chinese removed the peg against USD?

After the Chinese central bank removed the peg against USD, yuan appreciated but Chinese exports didn't seem to be affected. They are steadily increasing. How can this be explained ?
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1answer
10k views

Why did US dollar appreciate during the Global Economic Crisis (2007-09)

We know that the US dollar exchange rate increased during the global recession while usually when an economy performs weakly its currency should depreciate. How was there still a huge demand for USD ...
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0answers
61 views

Isn't the concept of “Currency Manipulation” really much ado about nothing? [closed]

(edit this bracket out: i'm sorry for being unclear in my question, it was too mild or undirected earlier, i hope the following is better; thanks) You keep hearing politicians and sometimes the biz ...
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1answer
99 views

How would a foreign trade multiplier behave if imports depended only on exchange rates?

I was wandering if the amount of imports and exports in an economy depended only on the exchange rates then what would the foreign trade multiplier of this economy look like ?
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229 views

What would happen in Venezuela if the currency exchange control is removed overnight?

What would happen in Venezuela if the government all of a sudden starts offering currency exchange by the prices of the free market? To my knowledge, the main reason for the government in Venezuela ...
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0answers
71 views

What will happen to property prices if local currency weakens against USD?

Say that the conversion rate of a local currency changes so that the currency is now relatively weaker against foreign currencies and as a result the inflation rate increases and as a result of that ...
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2answers
56 views

Foreign Currencies Exchange Data [closed]

I need data for forex rates because I'm working on a project to predict the rise and fall of the rates. Where can I find such data?
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1answer
117 views

What economics aggregate(s) could suggest an imminent change in exchange rates?

I have read articles about the Swiss Franc breaking its peg with the dollar and I would like to understand what indicators people look at to determine whether a currency break/depegging is imminent. ...
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4answers
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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 ...
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0answers
81 views

Currency Peg or Currency Substitution/Dollarize?

Why would a sovereign state choose an exchange rate peg over the demonetization of the local currency, replaced by hard currency? In the case of the West and Central African CFA Francs, France has an ...
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3answers
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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 ...
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467 views

Question on real exchange rate

If the Phillipine peso falls in value against the USD by 5% in a year, but the domestic inflation rate in the Phillipines is 10%, compared to 2% in the USA, the nominal exchange rate has fallen (by 5%)...
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Why is Indian rupee is stable against the USD even though most other currencies weakening?

The Indian Rupee (INR) seems fairly stable against the USD (1 USD = 62-64 INR) in the recent times even though most other currencies have weakened against USD, some by 20-30%. Apparently, INR is ...
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2answers
4k views

How inflation affects exchange rates?

I have a question regarding the impact of inflation on exchange rate between trading countries. Let's assume a hypothetical situation where the UK and the USA trade with each other. The USA import ...
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1answer
518 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 ...
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1answer
484 views

How does US (its economy, banks, industry) profit from dollar being the “standard currency”?

How does US (its economy, banks, industry, "finance industry") profit from dollar being the "standard currency"? I am not seeking "ideological" explanations, but explanations of the mechanisms ...
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133 views

What happen to Euro if Greece defaults [closed]

I have some money in Euros but living in USA. Today they are going to decide if the Greece will stay in Euro-zone. I was wondering what will happen to Euro if Greece leave the EU. Or what is expected ...
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1answer
396 views

How did the Plaza Accord revalue the Japanese Yen?

In September 1985, Japan, the US, and three other nations agreed to the "Plaza Accord," which appreciated the Yen and Deutsche Mark. The value of the Japanese Yen appreciated from 200 Yen per Dollar ...
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300 views

If Greece defaults, can it still stay with the euro?

Should Greece default, a forced conversion from euros to drachmas will be a further catastrophe to Greek economy as the drachma will quickly collapse. However, if Greece leaves the Eurozone, but keeps ...
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1answer
156 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 ...
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3answers
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Should Finland leave the eurozone?

Finland's economic recovery from the shock of the global financial crisis of 2007–2008 has been very weak. The country has been in recession for the past three years, with GDP expected to expand by ...
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1answer
142 views

Why is the Argentine Peso still so expensive?

In the last twelve months, the argentine peso (ARS) lost about 11% of its value in comparison to USD. In the same time range the prices rouse about 29% (spanish). What's the reason for this effect? ...
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1answer
52 views

The effect of inflation differentials on the relative prices of goods across countries

I am struggling to understand the answer to this question (the answer was given as C): If inflation in South Africa is lower than that in the United States (US), US exports are becoming relatively ...
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1answer
297 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 ...
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3answers
321 views

What determines the exchange rate of two fiat currencies if the supply of each is known?

In this blog post, economist Steve Landsburg posed a question about the value of Bitcoin which he didn't know the answer to. Imagine a future in which Bitcoins (or some other non-governmental ...
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1answer
122 views

Do we have some evidence of overshooting?

I was going through overshooting of exchange rates (which I probably haven't seen since undergrad) and it seemed to me that the story is a bit of a stretch. I wonder if there is some empirical test ...
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1answer
279 views

What is the difference between currency manipulation, and a fixed exchange rate regime?

China is labelled by some to be a 'currency manipulator', that is supposedly pegged to the US Dollar. What is the difference between currency manipulation and a fixed regime? Different motives? I ...
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0answers
63 views

What will happen if Chinese yuan turn floating exchange rate system?

The excange of Chinese yuan is controled by Chinese government in part now. What will happen if Chinese yuan turn floating exchange rate system?
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1answer
472 views

How can the Swiss exchange rate be very biased in a free market?

In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate with Switzerland was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were ...
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0answers
38 views

Why is the New Zealand dollar on parity with the Australian dollar?

The New Zealand dollar has reached parity with the Australian dollar for the first time in more than forty years. The question is - what are the economic factors that have caused this?
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2answers
1k 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)?
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1answer
809 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 ...
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1answer
38 views

why the currency crisis must occur at time t0 when the pegged rate equals the shadow exchange rate [closed]

Explain why the currency crisis must occur at time t0 when the pegged rate equals the shadow exchange rate and not before or after t0. Suppose the crisis were to occur at a date before and after t0 ...
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818 views

Currency Devaluation and the causes of the Tequila Crisis

I was reading about some of the famous crisis that happened in the past and i came across "the tequila crisis" in mexico during 1994-96. As a background, The Tequila crisis (also known as the Mexican ...
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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 ...
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1answer
673 views

Australian Dollar Devaluation

I am a layman in economics. I am curious about the current devaluation of Australian Dollar in comparison with the US Dollar. Could someone please explain, in simplest words possible: What causes ...
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1answer
557 views

What exactly is Foreign Currency Indexation?

As I understand it, foreign currency indexation (FCI) is when a government pegs its currency to another (usually the dollar), and their central bank buys or sells dollars to maintain a stable exchange ...
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1answer
73 views

Where is GBP/EUR exchange rate going? [closed]

Very recently, the GBP has been raising against the Euro. I understand this has to do with the EU injecting €1.1 trillion until Sep 2016 and the elections in Greece. My question is: when is this ...
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2answers
441 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 ...
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3answers
1k views

Why did the Swiss National Bank abandon its currency peg so suddenly?

There are many theories about why the Swiss National Bank (SNB) abandoned its currency peg a few days ago. My question is more specific: why did they make the change so sudden? Why not reduce the ...
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1answer
60 views

What are the most popular technical models used for forecasting exchange rates in international economics?

Are there any de facto standards when publishing, or is there substantial latitude in deriving one's own methodology? I understand in practice, even the St. Louis Fed is gently skeptical of the ...
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1answer
102 views

Does it mean that the value of currency decreases?

Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise. Does to ...