All Questions
Tagged with macroeconomics currency
72 questions
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Convergence between GDP(PPP) and GDP (Market exchange)
Economic theory predicts that as countries grow, their currency should appreciate. In other words, their GDP at market exchange rates should converge with cost-of-living-adjusted GDP (PPP). To measure ...
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Is there currency neither undervalued nor overvalued?
Is there currency neither undervalued nor overvalued?
I assume there is such currency in country with fixed exchange-rate regime.
Am I right?
Thanks.
- 139
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Why if Saudi Arabia will sell off European debt holdings then euro will be depreciated?
I read news about Saudi Arabia and I have a question.
How to explain that if Saudi Arabia will sell off European debt holdings (+Euro bonds) then euro will be depreciated?
My attempts to explain don't ...
- 139
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How to calculate exchange rate (non-PPP rate) if we know purchasing power of two currencies?
Let we know:
old purchasing power in country A (currency A)
old purchasing power in country B (currency B)
old random exchange rate (A/B) (non-PPP rate)
and
new purchasing power in country A (...
- 139
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How redenomination leads to strengthening of national currency?
I read that redenomination leads to strengthening of national currency but I didn't find more details.
How is it possible?
Thanks.
- 139
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21
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Is cause of undervalued currency the low cost of labor force or vice versa?
I read in some source that cause of undervalued currency is low cost of labor force.
In another source I read that low cost of labor force is conclusion of undervalued currency.
What case is true and ...
- 139
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3
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84
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Why does this example illustrating the effect of growth on exchange rates not work?
I'm looking for a (very) elementary explanation for why economic growth leads to one's currency becoming more valuable. This certainly seems like it should happen (example: "An economy ...
- 1,302
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What downside is there to making the USD the national currency for your country?
I get that for huge countries like China, you can't have the US controlling your currency.
But for some smaller countries, or new fledgling countries, why not have the USD be your national currency? ...
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What is the difference in economy between country that uses national currency only and country that uses not only national currency?
What is the difference in economy between country that uses national currency only and country that uses not only national currency (for example, national currency + dollar)?
Thanks.
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2
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What would be a truly universal currency?
I have no clue where to ask this, so here it goes... With the advent of LK99 and its potential uses in recent solutions for modified Alcubierre drive fields, it pushes me to wonder: What if humanity ...
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Determine the value of this hypothetical token
Suppose there is a token, an issuer of the token, and a reclaimer of the token. Every year at the beginning of the year the issuer creates and sells at auction 10 tokens. At the end of each year the ...
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Large quantity sale of CNY at current currency value
Some company wants to sell large quantity of CNY and buy USD on Forex. Let current currency value is 1 CNY = 0.14 USD at the time moment on Forex. When company sell large quantity of CNY, money supply ...
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1
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229
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How to prove that an increase in the money supply leads to devaluation of the currency?
In one article I've read that increase in the money supply leads to inflation and exchange rate change.
For example, if we have double increase in the money supply then we'll have double change in ...
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34
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Visualizing the "Impossible Trinity"
I would like to create a data viz to show, in one chart, where some of the major economies are on the trilemma. It won't be perfect, but I'm just looking for a rough characterization. For my data viz ...
- 1,101
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Distinction between world reserve currency and world reserve asset
The two sound very similar, almost identical:
The dollar as a world reserve currency
The dollar as a world reserve asset
But I'd venture there are important distinctions. As an asset, the dollar is ...
- 1,101
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77
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How Demand of a product affects the currency
Question : Iron ore is Australia's largest export. Suppose that there was an unexpected increase in demand for Australia's iron ore exports globally. Explain what this would do to Australian Dollar ...
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Will the value of ruble decrease in the long term if the sanctions against Russia are not lifted?
For simplicity, let's take the example of the USD-to-RUB rate. Currently, Russia manages to maintain it at around 60 RUB per USD. However, as far as I understand it, they manage to do it by selling ...
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245
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How can the exchange rate be virtually constant with major inflation rate difference and a widening trade deficit?
I have recently had a discussion with a colleague about what seems to be a rather strange macroeconomic aspect in Romania (which has RON currency):
EUR-RON exchange rate has been virtually a flat ...
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1
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74
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Mistake in Wikipedia article on Fixed exchange rate system?
I think there is a mistake in the following Wikipedia-article:
https://en.wikipedia.org/wiki/Fixed_exchange_rate_system
at figure 2 and 3.
I think the ECB has to BUY (not sell) the dollars as in point ...
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3
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198
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Did Russia peg Rubles to a Gold Standard?
Did Russia peg the Rubles to gold? I keep reading articles on that. Are there any catches or circumstantial facts, that Russia is not on a gold based standard? Trying to verify these articles.
...
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34
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Should governments print money while the currency gets stronger
In a given situation where a local currency becomes very strong compared to other major currencies (like the USD, EUR, etc...), should the government / central bank leverage the opportunity to print ...
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155
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Are there any notable exceptions to the Impossible Trinity theory?
I am referring to the theory presented on Wikipedia and The Economist that states:
The impossible trinity (also known as the trilemma) is a concept in international economics which states that it is ...
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1
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Does it make sense to talk about Bitcoin 'inflation' when little to no goods and services are listed in Bitcoin currency?
I think of inflation as a generalized increase in the price levels of a basket of goods and services.
I should add that my understanding presumes that inflation should be measured in the same currency ...
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How does one country peg its currency to another's? [closed]
For example, Belize has pegged its currency to the US dollar at an exchange rate of 2 Belize dollars to 1 US dollar. How does Belize do that?
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What is the effect of currency depreciation on import prices?
In Macroeconomics: A European Perspective (3rd ed., Blanchard, Amighini and Giavazzi), when discussing the reason for differences in the GDP deflator and the HICP for the EU, it states the following ...
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55
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What happened to the Zimbabwe cash dollar after the introduction of Dollarization?
Let's say, before dollarization, I owned 1 million Zimbabwean dollars in cash and the next day dollarization went into effect.
So in dollarization, the current Zimbabwean dollars will be invalid and ...
- 141
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1
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410
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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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Log deviation from steady state - understanding a journal paper
I hope a question like this is fair game on this website!
I'm doing some research for my thesis, and have come across what seems to be a pretty simple model - two countries, A (representing the USA) ...
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26
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4
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Could eliminating all taxes and only creating new money theoretically work?
Imagine you had the opportunity to found a new country from scratch (in 2020).
Value exchange would be digital, where only the state can create new currency units.
Instead of relying on income tax ...
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Why does a current account deficit contribute to making a country a "sitting duck" for currency speculators?
George Soros had this to say about the factors surrounding his famous short of the British pound:
The U.K. had a large current-account deficit…, modest FX reserves and
no capital controls to rebuff ...
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188
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Is Currency Devaluation a cause or effect of interest rates?
I understand that Federal bank/Goverment can manipulate the currency market and devalue its currency by printing more money or buying foreign currencies/assets (essentially increasing the supply of ...
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Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?
As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to ...
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How to interpret correctly the uncovered interest rate parity condition
So, according to my macroeconomics professor's notes, the UNCOVERED INTEREST RATE PARITY CONDITION is defined this way :
Now, i don't quite grasp the concept of the 'expected appreciation rate of ...
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157
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Is fiat currency better than a backed-currency?
My question is would it be better if we went back to something like a gold standard but backed by a finite virtual material instead? It avoids the problem of fluctuations in gold supply. The money-...
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Why did foreigners keep buying Swiss francs at -41% (not a typo) interest rate in the 1970s?
A Bloomberg (opinion) piece notes
In January 1975, the Swiss government held an emergency meeting and then took the extraordinary step of slapping a 41% annual penalty on foreign deposits. But even ...
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4
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147
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What is the difference between microeconomics money and macroeconomics money?
In microeconomics, \$USD are a store of value. I can sell a candy bar for \$1, and I can hang onto that \$1 for a year and then buy the same candy bar for that same \$1. If I print \$1 (and get away ...
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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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Purchasing power of currency abroad
Say you have two countries A and B. Suppose we have a situation where country A's currency can purchase much more in country B than the other way round. What causes this phenomenen?
Is it possible ...
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Why does capital flight cause inflation?
Context: I was watching a video about Venezuela, and, it all started with capital flight due to poor confidence in the government. The government tried to stop it, and in the process it created a ...
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2
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253
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Why don't we transact with securities rather than fiat money?
I don't know a whole lot about economics besides for an intro course I took once so bear with me please...
I'm a software developer working with cryptocurrencies, and I got to thinking that it would ...
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603
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Are cryptocurrencies a ponzi scheme or a bubble?
Several users in this forum have addressed bitcoin and other cryptocurrencies as ponzi schemes. Bitcoins have several uses which could legitimate its value as a currency, but also have received ...
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How do economic and financial policies in government deal with cryptocurrencies?
Given the decentralized nature of cryptocurrencies like bitcoin and ethereum, how can centralized organisations like banks and the government create policies around it without changing the way ...
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What are the constituents of a country's inflation
If we assume a country where only demand pull inflation holds, that is no imports cost inflation or currency fluctuations are a risk, then we can assume that inflation is determined by:
Consumer ...
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Norway inflation and exchange rates
I am looking at Norway's economy, and I'm trying to make sense of some of the data I see. Norway's economy has a very close relationship to crude oil, and in 2014 crude oil had a massive drop. Looking ...
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Where can I find historical (very old) USD printing data?
Where can I find historical/very old USD printing data? Charts can be useful, but I want numbers. It is for a project.
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1
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308
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How would unlimited free energy affect the global market? [closed]
What will the effect on today's global market if a new source of free unlimited energy was to be discovered?
How badly will it disrupt today's global market and how badly will it affect our currency?
...
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Why is Japanese Currency tied to gold?
I was listening to a Bloomberg market update, and the journalist mentioned that the Japanese currency was down as Gold rose.
I've heard that investors park their money in Yen. Is the reason the Yen ...
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30
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Can a weaker currency be used to offset lower productivity of labour in an economy?
Can a weaker currency be used to offset supply-side (specifically low productivity of labour) problems of an economy to restore international competitiveness?
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2
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8k
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Confused about relation of inflation to a currency's depreciation?
I'm a complete newbie to this foreign exchange stuff and was reading about the impact a country's price levels have on exchange rates.
So from what I understand, the general idea is that inflation ...
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1k
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Uncovered Interest Parity question
I am trying to understand the fact that, given that the uncovered interest parity holds, a rise in dollar interest rates will cause the dollar to appreciate. Is this a good intuition?
Uncovered ...
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