# Tag Info

6

Nobody has to loose in an arbitrage. Economic relationships are not necessarily zero-sum (in fact often they will not be zero-sum). For example, if apples in city A are sold for ${\\\$}5$and apples in city B can be sold for${\\\$}8$, and we assume zero transaction cost there will be an arbitrage opportunity to earn ${\\\$}3$riskless profit per apple by ... 4 It's important to distinguish between the effects of arbitrage on: a) the direct parties to arbitrage transactions; b) other agents in the markets in which the arbitrage takes place. Suppose arbitrageurs buy a good in market A in which its price is \$1 and sell in market B where its price is \\$2. Assume further that in each market those prices have freely ...

3

You are wrong/vague here: the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. If the rupee becomes more expensive w.r.t. the dollar, demand for the rupee usually decreases, as Indian exports are now more expensive to pay for when measured in dollars, and hence fewer people seek to convert ...

3

Is it possible for India to have a Free Banking arrangement with one singular national currency? Under free banking you would only end up with single currency if one bank manages to become a monopoly on issuing the currency. That is possible, although at least historically it did not occurred under free banking systems. Also this would be in essence ...

2

Normally in order to full dollarization to occur there will be some conversion rate at which debt denominated in old currency is converted into new one. For example, according to the World Bank definition of full dollarization: All government and private debt under full dollarization is denominated in dollars, and both public and private accounts must be ...

2

The area of research you are looking for is market microstructure, the study of how markets work and the process of price formation. Naturally, this means studying liquidity, information diffusion, uncertainty, and dynamic games. There is not a lot of mechanism design in market microstructure -- though work along those lines would certainly be welcomed. For ...

1

" Does that not mean a lot of rupees flowing into circulation in the country?" no. it means other currencies are flowing into the country, eg USD. then locals will go to their banks and exchange USD for RUPEE. There will be no new RUPEES created (unless the crazy scenario of all the banks run out rupee and them needing the central bank to print ...

1

Quoting Wikipedia: Bimetallism[a] is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.[3] Let's suppose that France says 1 ounce of silver is F1 (1 franc) and one ounce of gold is F80. And let's suppose that ...

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