26 votes

Can someone explain why sterling-dollar parity is bad?

There's nothing wrong with \$1=£1. Unless it was \$1.50=£1 last week - then it's a big problem - for the people who have £, at least! The people who have \$ will be glad they can buy things from the ...
user253751's user avatar
  • 1,000
20 votes
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How do economic sanctions work? How do they not create an arbitrage opportunity?

As the other answer says the sanctions include prohibition on selling to third parties. However, this still creates incentives to cheat on these sanctions. It is not always so easy to determine final ...
1muflon1's user avatar
  • 55.5k
13 votes

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

To measure the costs of different people speaking different languages, researchers use a "linguistic distance" metric, see for example this paper. However, measuring the cost of linguistic diversity ...
emeryville's user avatar
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12 votes
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On what basis do countries repay international loans?

Only sufficiently credit worthy countries are able to borrow money internationally in their own currency. In principle you are right that such a country could effectively default by expanding the ...
noob2's user avatar
  • 255
11 votes

How do economic sanctions work? How do they not create an arbitrage opportunity?

The short answer is yes, the impact of sanctions (and other export controls) on the market prices of goods can create an arbitrage opportunity for someone willing to violate or circumvent those ...
ajb's user avatar
  • 211
10 votes
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Screw foreign investment, lets just print money

"Foreign Direct Investment" is to be understood as bringing in an economy productive capital, and not just purchasing power. When an economy is seriously below full employment (of capital ...
Alecos Papadopoulos's user avatar
8 votes

Can a closed economy flourish?

It depends on what you mean by "sustained growth" and "flourishing markets". Clearly the Earth as a whole is a big market. If you do not look at human made borders: the global economy is currently ...
Giskard's user avatar
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8 votes
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Why Nobel prize winners studied economics?

The Nobel Prize website is a good source of information. On the economics prize page they have a link to a page for each laureate. From there you can find, in particular, a biography for each prize ...
Ubiquitous's user avatar
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8 votes
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What would happen if the US defaults on its debt?

The Russian default was an extraordinarily insignificant event compared with a current-day US default on all treasury securities. There are no remotely similar events to compare it to. This makes it ...
farnsy's user avatar
  • 836
8 votes
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Why we need to control for the interation of year and industry fixed effects?

When you control for not just year fixed effects but instead year-region or year-industry it adds flexibility. The year fixed effects controls in a flexible manner for the time-trend and is more ...
Jesper Hybel's user avatar
  • 3,296
8 votes
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Is climate change an economic question?

Climate change in itself, its measurement and the fact that it is happening, and modeling its speed or trying to discover its causes (e.g., carbon emissions, methane emissions and so on) is not an ...
1muflon1's user avatar
  • 55.5k
8 votes
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Why does Russian ruble conversion rate to USD remains constant at 1 to 0.01?

Currently there are quite a few restrictions on US to Russia bank operations. The answer is that Google Finance gets its data for the exchange rates from a specific service, Morningstar, who are ...
Giskard's user avatar
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7 votes

What should we do if the subsample have the opposite results to the general results?

This sounds like a case of Simpson's Paradox. Did you control for fixed effects? You might also have heterogeneity - there may be different results in developing vs developed countries. Generally, it'...
RegressForward's user avatar
6 votes
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Ricardo's theory of comparative advantage

The solution concept used in Ricardo's modell is the competitive equilibrium. Let the set of countries $N$ be defined as $N = \left\{E,P\right\}.$ (England, Portugal) Then the competitive equilibrium ...
Giskard's user avatar
  • 29.2k
6 votes

Why Nobel prize winners studied economics?

Maybe Lives of the Laureates? Lives of the Laureates offers readers an informal history of modern economic thought as told through autobiographical essays by twenty-three winners of the Nobel Prize ...
Elias's user avatar
  • 983
6 votes
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How can the HKMA peg the Hong Kong dollar at 7.8 HKD/USD for so long?

To maintain the currency peg, the Hong Kong Monetary Authority (HKMA) has to buy HKD and sell USD when the currency comes under depreciation pressure and sell HKD and buy USD when the currency comes ...
M3RS's user avatar
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6 votes
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What shoud we do when the expected treatment overlaps control sample in DID?

Your first quote seems to be given as an explanation of how they constructed Figure 1 (however I cannot be sure since you did not state pagenumber for the quote). Anyway, Figure 1 compares a treatment ...
Jesper Hybel's user avatar
  • 3,296
6 votes

What should we do if the subsample have the opposite results to the general results?

tldr: As the other two answers also indicated, there is not necessarily a problem with your results. It might be the case that the two subgroups have different distributions of the covariates. ...
tdm's user avatar
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5 votes
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Omitted variables in gravity model

The omitted variable bias in gravity model is an important issue given that some factors are unobserved or difficult to quantity. To solve this issue trade economists tend to rely on various fixed ...
emeryville's user avatar
  • 6,935
5 votes

Is the development of "developing countries" evidence against the idea that former colonial powers owe their headway to exploitation?

The recent development of many "developing countries" and "emerging markets" does not mean that Western colonial powers did not exploit them in the past. Emerging economies owe their modern GDP ...
rocinante's user avatar
  • 257
5 votes

Why are aeroplanes not made in one place?

Short answer Airbus is a particular case of decentralised supply chain which came from historical and political reasons. Airbus is a consortium with several European states having a stake on it, which ...
JoaoBotelho's user avatar
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5 votes
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What should we do if the subsample have the opposite results to the general results?

I'd interact the regressor you are interested in with a dummy for the country being developed and see what happens. Its entirely possible that the mechanisms at play in developed contries are ...
Grada Gukovic's user avatar
4 votes

Why does the Balance of Payments have to (more or less) equal zero

It was also really strange for me at first. I asked from many people who might happen to know the answer. However, they were all not 100% satisfactory. I think, Kenny LJ's answer is 99.5% correct but ...
SugarkhuuR's user avatar
4 votes
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Is the development of "developing countries" evidence against the idea that former colonial powers owe their headway to exploitation?

To complement @rocinante answer the argument described in the question silently assumes that growth can happen only if you steal from somebody. So if the past colonies cannot steal from anybody, they ...
Alecos Papadopoulos's user avatar
4 votes
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What does 'one dollar, one vote' mean?

It appears to suggest applying the way shareholders vote in a company to the political setting of democracy: each citizen will have as many votes as his/her monetized wealth. So the rich will have ...
Alecos Papadopoulos's user avatar
4 votes
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Why are aeroplanes not made in one place?

The main reasons for decentralization in aviation industry would be lower costs, but also (if not most importantly): supportive public policies (e.g. local tax incentives, provision of low-interest ...
Pawel Kam's user avatar
  • 462
4 votes

When can we expect China to become a developed country?

Just because a country has a lot of resources (including human capital), it does not necessarily form a path for a developed nation. China is also very involved in military conflicts. It just takes ...
Vraj Shroff's user avatar
4 votes
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Alternatives to avoid sanctions

You have most of the explanation here - the only missing piece is that as the de facto reserve currency of the world, almost all global trade is conducted in US dollars. Typically what happens is ...
heh's user avatar
  • 1,808
4 votes

What is the difference between the international Fisher effect and uncovered interest rate parity?

They are related and have very similar implications but they are not the same. I will try to provide simple explanation here for more nuance you can have look at for example Mogaji (2019) and sources ...
1muflon1's user avatar
  • 55.5k

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