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Questions tagged [international-economics]

Use for questions related to international trade, commercial policy, open economy macroeconomics, international finance, and exchange rates. It can also be used in financial and monetary policies, economic development, migration and factor movements, as long as they are specifically related to an international context. Preferably use in conjunction with other, more precise tag.

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31 views

Are currencies equilibrating?

I was travelling recently and realised that dollars, euros, British pounds and Swiss francs all have more or less the same worth (i.e. 1 dollar $\cong $1 pound $\cong$ 1 euro $\cong $ 1 chf). This was ...
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0answers
11 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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7 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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0answers
15 views

why US don't like China trade deficit? [duplicate]

Because of the dollar, US basically have unlimited credit. US could simple print money for good. Why US don't like China trade deficit? If US is a person, and the person could use paper to exchange ...
2
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0answers
8 views

Discrepancy of GDP and International Transaction Releases for Exports

The Bureau of Economic Analysis ("BEA") provides consolidated data from several different government agencies. Currently they provide exports under both a Gross Domestic Product ("GDP") release as ...
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0answers
6 views

wage/productivity, what does it show

I just confused about the fact that does wage/productivity show the wage gap? So if wage/productivity is the wage gap then by the increase in productivity the wage gap should decrease as the ...
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1answer
23 views

Would PPP adjustments between countries be irrelevant if all countries had the same relative prices?

I'm trying to understand the relationship, if any, between the fact that countries have different relative prices (e.g. different 'food price-to-general consumer prices' ratios) impacts the need for ...
0
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0answers
5 views

Framework for assessing suitability of government intervention

I am writing a paper on mobile roaming and I am having trouble with some aspects of it. The paper is required to have an "analytical" part and I am struggling to come up with suitable ideas. I figure ...
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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 ...
2
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2answers
87 views

Do sanctions work?

When countries commit "economic crimes"---ie, theft of intellectual property, dumping, currency manipulation---are sanctions effective at making them stop? I am specifically looking for examples of ...
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0answers
29 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
10 views

Cross Currency Swaps

How can cross currency swaps or derivatives be used to help a country hide its debt? How did Goldman Sachs do this in Greece’s case?
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0answers
15 views

What is the rationale behind David Friedman’s division of countries?

David Friedman stated, on multiple occasions, he’s wary seeing Europe become one single country. Similarly, he’d much rather have the US divided into more independent societies. What is ther ...
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1answer
35 views

Greek Debt Crisis

If the Greek government defaults on its bonds issued by French and German investment banks, how does that prevent the French and German governments from paying back the money that they owe to ...
2
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1answer
65 views

Is there a measure of similarity for economies?

Is there a measure of similarity for economies? For example, I would like to find the world economies most similar to the UK.
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0answers
21 views

Why bonds held by foreign investors is greater than total bond issued?

Total bond issued is reported by BIS debt securities data. Let BIS denote this amount. Bonds held by foreign investors is reported by Balance of payment statistics (IMF). It is the portfolio debt ...
2
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1answer
45 views

The Difference between investment and savings in CA identity

Mathematically speaking the current account is defined as: $$\text{CA}=S-I$$ where $S$ is savings and $I$ is investment. We know for a closed economy $S=I$ so $CA=0$. practically speaking for an ...
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2answers
25 views

Capital Flight and Interest Rates

I am currently reviewing some stuff on capital flights and self fulfilling crises. In this scenario, investors generally think that a low availability of reserves could imply that the central bank may ...
1
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2answers
29 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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0answers
16 views

Can the USA really have an exchange rate policy?

I'm reading Martin Wolf's book The Shifts And The Shocks, about the global crisis. In it, there's a section where the author claims that the USA cannot not have an exchange rate policy, since all the ...
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0answers
86 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
436 views

Does National Savings equal zero in a closed economy? Please give an economic intuition

Context: $Y -(C+I+G) = X - M$ In a closed economy, $(X-M) = 0$ Notations Y --> Income/Output C,I,G --> Consumption, Investment and Government expenditure respectively. X --> Exports M --> ...
4
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1answer
48 views

Why does the EU need a clearing centre to circumvent US sanctions against Iran?

As reported here and elsewhere, the EU is considering the creation of a clearing house to keep trading with Iran despite US sanctions. Why is it not possible for the EU to conduct normal financial ...
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0answers
38 views

how to find whether trade is possible between two nations [closed]

In the following image, we have U.S. and U.K. producing wheat and cloth in bushels/hour and yards/hour respectively. In all cases except in case D, given in the figure, trade is possible between ...
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1answer
44 views

How does the cost of switching over to green energy compare to the cost of the war in Iraq?

How does the cost of switching over to wholly green technology in the US at current prices and at current technology without factoring in possible improvements in efficiency or technology solely in ...
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1answer
38 views

What can explain increasing exports after default episodes?

I am going through a paper on sovereign default by Mendoza and Yue (2012), in which defaults are explained in terms of how firms that use foreign intermediate inputs lose access to international ...
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1answer
27 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 ...
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1answer
45 views

When can we expect China to become a developed country?

China has the 2nd largest GDP in the world and also has a high GDP growth rate. According to Richard Lynn's IQ and Global Inequality, the Chinese have a mean IQ of 105, which is one of the highest in ...
2
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1answer
34 views

Where can I find data on market capitalization?

I am working on Home Equity/Bond Bias and need data to calculate the indicators of Home Equity Bias. So where can I find data on market capitalization (stocks and bonds) by year for each country? ...
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1answer
44 views

Why do large financial institutions make international transactions in digital currency?

I've heard that blockchain technology has been used extensively by financial institutions when making international transactions to eachother, with speed and transparency and cryptographic security ...
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0answers
26 views

Dornbush model - relationship between i and S

In the Dornbush model, when we separate short and long run equilibrium. This is what I apparently have understood: SR1: an increase in Money Supply ($M_s$) leads to a fall in domestic interest rates (...
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0answers
24 views

Devaluation of exchange rate meaning

Pilbeam's textbook on International Finance (p. 106) says: (...) the immediate effect of a devaluation of exchange rate from $S_1$ to $S_2$ is to make domestic good competitive (...) How can be ...
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0answers
17 views

When finding targets in a trade war, does the goods balance or trade balance matter more?

By most measures, most people who look at trade balance, but it might include a good chunk of services imports/exports who might not be as readily subjected to tariffs.
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1answer
32 views

Terms definition in Balance of Payment

I have problems in distinguishing among terms in the Balance of Payment / the international balance sheet of a nation. As far as I know, on Assets and Liabilities sides of BPM, there are Portfolio ...
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1answer
36 views

Why shouldn't governments use Forex reserve to pay their debts?

India has around 470 billion USD in debt and has around 400 billion USD in forex reserves. So why should India or any other nations shouldn't use their forex reserves to pay off their external debt ?
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1answer
49 views

Generic bond yileds

I was looking on historical sovereign bond yields for a project. I was wondering what is meant by "generic bond yields" mentioned on bloomberg. Somewhere else i found data about the same country but ...
7
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2answers
753 views

Why would China and Russia selling the US' debt ruin the economy?

I was listening to an interview with David Harvey and he mentioned that if Russia and China were to sell the debt owed to them by the US, the US economy would take a serious dive. How would they sell ...
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3answers
79 views

Why does a strong dollar make imported goods cheaper?

I'm having a hard time visualizing why a strong dollar would make an imported good cheaper? If I buy an ounce of gold in the US for \$1,353.70 (todays rate) and I buy an ounce of gold in Europe, ...
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1answer
154 views

Impulse response functions?

I have a very basic model about a small open economy. This is a summary: $$ E_0\sum_{t=0}^{\infty}\theta_t U(c_t, h_t) $$ utility function: $$ d_t = (1 + r_{t-1})d_{t-1} - y_t + c_t + i_t + \...
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0answers
74 views

Consequences of a positive uncovered interest rate parity (UIP) spread for an emerging market economy

Empirically we observe that the uncovered interest rate parity (UIP) does not hold; in fact the exchange rate adjusted return on an emerging market bond is higher than the return on US bonds; I know ...
2
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3answers
94 views

Why are aeroplanes not made in one place?

As an example, different parts of an Airbus A380 are produced in factories all over Europe, and then assembled in a factory in France. Transporting these massive objects must be incredibly expensive (...
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1answer
115 views

Why can we see the Current account as variation in NIIP?

Let's designate the Net International Investment Position(NIIP:it's the net international wealth of a country), as $B_t$. Why can we see the current account at time t, as $CA_t=B_{t+1}-B_t$ , when we ...
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2answers
237 views

How does Russia have so much foreign exchange reserves?

Source Russia is under U.S. sanctions. How does Russia have so much foreign exchange reserves?
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1answer
336 views

What's the economic effect of a country reducing its imports?

If a country enacts a program that successfully reduces its imports, eg: A 'buy local' advertising campaign A program of training mechanics to maintain older cars, rather than buying new imports An ...
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1answer
1k views

How could the economic cost of the world not speaking the same language be estimated?

While languages are fun and add color and flair to cultures and make the world a more interesting place, they also have a cost. Beyond the monetary costs of translation/editing/proofreading, ...
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0answers
30 views

Why Yen grew stronger after North Korea's H-bomb threat? [duplicate]

Financial markets have had only a muted reaction to the dispute in recent months, but on Friday assets regarded as havens for investors jumped immediately after the news of North Korea’s latest H-...
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0answers
140 views

Under what conditions are tariffs or export subsidies expansionary?

Charles Kindleberger writes in the introduction to /The World in Depression/: The imposition of tariffs should be expansionary for the importing country, if contractive for the countries losing ...
4
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2answers
102 views

How is sending money out of a country draining its economy?

From this article: Every year, Mexicans working in the U.S. send at least $20 billion back to Mexico in the form of remittances, placing a huge drain on our economy. But I don't see what negative ...
5
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2answers
152 views

Why does every electronic transaction of USD legally take place on American territory?

In an article of a respected German newspaper (Die Zeit) I found the following statement (translation by me): 90 % of all foreign exchange trades are dealt in USD. Since every electronic ...
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1answer
248 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 ...