# Tag Info

## Hot answers tagged foreign-exchange

8

Technically you are changing the BDT/USD exchange rate, or at least you're changing one of the reasons. If supply/demand changes, the value of a particular currency is going to change as well. But there are other factors - interest rates and political climate also affects the rate. To give you an example, Venezuela is now going through some rough times, ...

5

No, you can definitely grow GDP without foreign investment or even trade. There are 3 basic ways to grow GDP. One is increasing human capital, which includes increasing population as well as allowing women to work. Basically, anything that increases the number of people in the labor force. Second, we have physical capital, which is where foreign ...

4

Think about what a loan is in terms of purchasing power. You give a bank your signature on a loan contract and they give you something that will allow you to buy real stuff (houses, cars, whatever). You enjoy this real stuff for some time. Then at the end you have to give the bank something that will allow them to buy real stuff, only more of it. I'm ...

4

As there is no practical limit on the number of cryptocurrencies that can be created, and as no one crpytocurrency has a unique advantage over any other, and as no cryptocurrencies are legal tender anywhere, the theoretical market cap of any one cryptocurrency has zero underlying value. What its actual market cap is, will depend on how many suckers can be ...

3

why would they force to trade in U.S. dollars instead of just taking the oil from their country by force? One of the basic tenets of power is that $control$ is superior to $ownership$. War is expensive, oil must be stored before it is used, and any captured production assets must be defended and maintained at great cost. Rather than own all of this ...

3

Is the only benefit to fluctuating currency rates that it means some people make a lot of money by trading currencies, with zero appreciable benefit to humanity at large ? No. The main benefit of flexible exchange rates is that it allows the currencies to adjust to imbalances in the balance of payments between countries, itself a result of real economic ...

2

In many ways, it's no different to how any other price is set - by supply and demand. The only thing is, that because it's a transaction of money for money, there's some symmetry at play. When you buy USD with BDT, the price you pay for your USD will go up if the general market demand for USD goes up, or if the supply of USD goes down. Similarly, it will go ...

2

You get cheaper access to inputs. For a large advanced economy that is relatively diversified, it is possible that unilateral tariff reductions across many or all sectors can be good for the economy by freeing up resources presently occupied in low-value activities with few prospects to contribute to technological progress. The additional ease of doing ...

2

Unfortunately, those who are riding the current trend do not have a clue about what they are doing. I guess, they don't even think of hypothetical situations you've given above to legitimise cryptocurrencies, instead, they appear to be enjoying the joyride. If anything, cryptocurrency trading is more like a fantasy share trading with real consequences. As ...

2

U.S. federal financial liabilities consist of currency, reserves at the Fed, bonds, and bills. Bonds and bills do not pay interest, currency does not. For reserves at the Fed, excess reserves need to pay the market rate of interest, while paying interest on required reserves is optional. (The Fed switched to paying interest on required reserves in 2008; it ...

2

Used to be capital controls. You could only buy dollars (or any other foreign currency) through official channels at the official favorable rates by providing documentation displaying need for said currency (e.g. Travel or import documents).

2

Typically foreign reserves will just be assets denominated in a foreign currency, most importantly government debt. Another popular reserve asset are IMF special drawing rights, which are convertible into currencies of member countries. I don't think there is any amount of physical cash currency in international reserves. You can see the makeup of US ...

2

This is an excellent question and I will do my best to give you a well thought out answer. Many observers believe the U.S. dollar (USD) will lose its status as the world's reserve currency. In fact, I got pushback from another forum regarding finance about this. These doomsday dollar folks cite agreements between China and Iran on settling trade in their ...

2

If the Japanese captured Hawaii and hence also all the dollar bills in Hawaii, then the problem would not be that they "hoarded" these dollars, but that they would have been able to use these dollars (to buy other goods and services). And so the purpose of the Hawaiian overprint notes was this: they "would be worthless in the hands of the enemy, but could ...

2

If you actually raise local tax it would help you can just convert the money raised with local tax into the currency in which the debt is. For example, if UK has some debt in Euros they can raise taxes in pounds and just exchange them at an exchange rate for euros and pay down their euro denominated debt. However, it would not be possible to pay the foreign ...

1

I'll try to answer your question as best as I understand it. There are innumerable reasons for why taking oil by force from these nations would be seen as unnecessary by the US, for both political and economic reasons. Just to name one risk, the condemnation of the world community and the breach of trust in our status as a relatively non-predatory hegemon ...

1

Quick and easy way is to think of a foreign currency (let's call this USD) as another good with its own demand and supply. Imports and exports When a country imports a lot (assuming it imports from the US or the invoice is in USD), the importers will need to pay for these goods in USD. To do this, they go to a bank (roughly speaking) and buy USD, pay for ...

1

The central bank's accounts are not the same as entire country's accounts. The foreign currency reserves statistic comes from the Reserve Bank of India, the central bank, when it discloses its account. The trade deficit is not a property of the central bank's accounts, although the central bank might have economists producing that statistic. The trade ...

1

Let us call the country with the trade deficit, country A, which is our domestic country. If a country builds up a trade deficit, it is selling less goods to other countries than it buys from them. To do so, A must exchange its currency for foreign currency. This means more demand for the foreign currency and more supply for the domestic currency. More ...

1

The foreign exchange market is a huge over-the-counter market, primarily intermediated by large dealer banks with subsidiaries around the world (sometimes referred to as “money center” banks). A buyer or seller of a currency is almost certainly at or trading with one of these banks. The dealer banks make money via a “spread,” where every buyer or seller of ...

1

It's not impossible for a developing country to achieve economic growth without foreign investment, although in some circumstances it could be extremely difficult. Suppose a country's gross output in year 0 is $Y_0$. Assuming autarchy, we can write: $$Y_0 = C_0 + I_0$$ where $C$ is consumption and $I$ is gross investment (government expenditure is assumed ...

1

Simply because when you want to buy goods from country A, you (generally) first have to buy A's currency, which means selling yours. And given that selling a currency exerts a downward pressure on its value, the main idea behind a 100 percent cash margin requirement is about counter-balancing the depreciation by exerting an inversely-proportional upward ...

1

It could be a sustainable economic policy. It depends. Assuming your government doesn't have a big budget surplus, it will have to replace revenue lost from tariffs -- i.e. raise other taxes. Most taxes are distortionary, i.e. discourage productive economic behaviour. Especially for less developed countries and countries with weaker international ...

1

Your conclusion is correct here. Since at the current FX rate you can buy the burger cheaply at an equivalent rate of 2 EUR in the US. So basically, if you live in Germany and want to buy a Big Mac, you are better of buying the Big Mac from the US since via the FX rate you will still have 1 EUR left(if you started with 3 EUR) and hence this will increase the ...

1

The convention in finance is that any currency pair "currency1/currency2" is to be interpreted as the number of units of currency2 needed to buy one unit of currency1, or alternatively, as the number of currency2 you get from selling one unit of currency1. For instance, as of 13th of Match of 2017, the currency pair rate of exchange between the £ and the US ...

1

NO, it is not redundant. Controlling for nominal effects gives you a better picture, and makes more sense on a theoretical level. To transform assets into USD use $\textit{asset}_{USD}=\frac{s_t P_{t,JPY}}{P_{t,USD}} \textit{asset}_{JPY}$ where the fraction is the real exchange rate, $P_t$ is the respective price level and $s_t$ the nominal exchange rate. ...

1

Russia has been ramping up its production of oil since late 1990s after it defaulted on its debt. It has been maintaining positive trade balance since then. Also, notice in the above graph, Russia has had current account surplus for a long time. It is somewhat similar to saying that Russia has been a net lender to the rest of the world. The current account ...

1

russia uses its oil revenue to setup russia stabilization fund in 2004. The money in that fund is used to pay for national budget deficit. The foreign exchange reserve of Bank of Russia is not affected by the US led sanctions.

1

Yes, the earlier answer about currency value gives some links, including a link to an IMF publication that presents models (methods) with some notes on how to calibrate them and further links to literature. There they describe among others also the macroeconomic balance framework that takes into account the internal and external balance at the same time.

1

At first, U.S. exports increase because US exports become cheaper due to the low inflation rate. Inflation itself only influences the exchange rate indirectly through its effect on supply and demand for currency. That effect goes through trade. For that to happen, trade must first take place and so US exports must first increase. So at first the exchange ...

Only top voted, non community-wiki answers of a minimum length are eligible