18

I think you misunderstand what "electronic money" is - moving electronic money around isn't simply a matter of sending the right "codes" - it is ultimately about asking the central bank of that currency to move money around. Sure you can open up excel and write in it "I have \$100" but that isn't USD, much as writing \$100 on a piece of paper doesn't make ...


13

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 appears to be challenging. Some effects are shown along the following lines. Impact of linguistic distance on international trade In this paper, they construct ...


9

The classic answer here would be Libya and Brunei, but I think Libya now has debt. Brunei is a strange case in that it uses a joint currency with Singapore dollar, controlled by the monetary authority of Singapore, so in effect you can use Singapore debt as a substitute for Brunei dollar investment. Not having any debt, and having a free currency is ...


9

What do you mean? A country per se cannot be bought. The wealthiest man, Gates, has a net worth of around 67 billion USD (forbes). What could he buy? GDP Whatever it the country produces. The poorest country by GDP per capita is Burundi, with a total GDP per capita of around 267 USD, and a population of 10 million. That gives then a total GDP per year of 2....


8

Countries do not just stop recognizing foreign wealth because there are two kinds of wealth: real assets, and claims on the production of others; the values of both of these types of wealth are not determined by consensus, but rather by the use or pleasure one can derive from them. To the first type— real assets are stuff like machines and cars and homes ...


8

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 winner where the laureates often talk about the genesis of their interest in economics. For example, Eric Maskin writes I became a math major at Harvard ...


6

Why do so many people die in hospitals? Aren't doctors there supoosed to save lives? The IMF is the trauma surgeon of government finances. When a country asks the IMF for help, it is because its finances are in very bad shape. They no longer have enough money to pay for public services, infrastructure, pensions, salaries. Without some kind of external help, ...


6

As Jason Nichols says, these terms are often used interchangeably. The general theme is that pretty much anything can be called a "peg" (except perhaps the case where two countries are literally using the same currency), while "fixed" tends to refer to institutional arrangements that are more automatic, where changes in the exchange rate are perceived to ...


6

"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 and labor), than a case can be made that "printing money" (i.e. creating purchasing power out of thin air) may not result in just inflation, but it may indeed bring into ...


6

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 growing and some would say it is flourishing. There is no physical reason why this could not be done without the borders. There are areas where the current ...


6

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 in Economics. The essays not only provide unique insights into major economic ideas of our time but also shed light on the processes of intellectual discovery ...


5

An interest rate is the return that a lender earns on money lent to someone else. If the interest rate is higher then it makes lending money more attractive because the return is higher. In particular, if the interest rate in, say, Russia increases relative to that in the USA then American lenders will switch from lending their money in America to lending ...


5

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 growth to cheap labor, as (former) Western colonial powers switched their (expensive) manufacturing bases to countries like China, India, etc. In the past, they were ...


5

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 effect estimators. But, the question is what is your variable of interest? Exporter-by-year and importer-by-year fixed effects For instance, if you are ...


5

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 hard to make guesses about all the ramifications. Still, speculating is fun. My guesses, based on a complete default (no money recovered) on all treasury ...


5

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 under appreciation pressure. Depreciation pressure: The HKMA operates a currency board, which means that more than 100% of outstanding HKD is backed by USD ...


5

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 means that each state wants a part of the production in their country. Long answer: Why is Airbus' supply chain disperse The aviation industry for ...


4

The intuition for this result is pretty straightforward, and I think one can think about it in terms of saddlepoint stability in a phase diagram, although you don't need any serious technical apparatus - it's all conceptual. Krugman and Obstfeld posit a model in which government expenditure does not affect the "full employment" level of output $Y^f$ (to ...


4

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 are bound not to ameliorate their material welfare. Assume two persons, $A$ and $B$, that currently have the same unexploited resources. It so happens that in ...


4

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 or no-interest loans, other production subsidies), technology and specialization, industrial agreements, such as offset (in order to sell Boeing 747s to Air ...


3

There is no mistake. The solution: it is assumed that there is only one price at the domestic wheat market. Hence domestic producers will not sell at price $P_w$ and price $P_{Quota}$ as well. This makes sense: Suppose you are a domestic producer and you are aware that the price that results from the quota system is $P_{Quota}$. Knowing this you would not ...


3

The Balance of Payments (BOP) records, in summary form, every single international transaction.* Also, the BOP uses a double-entry accounting system, where every entry MUST be balanced (hence the name) by an entry (or entries) that is (or are together) equal and opposite. In your example, say an American consumer buys \$1,000 of sashimi from a Japanese ...


3

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 is a vector $$ \left(p,\left(q_{x,i},q_{y,i}\right)_{i\in N},\left(c_{x,i},c_{y,i}\right)_{i\in N}\right), $$ where $p$ is the equilibrium price ratio of the ...


3

The Russian economy has been in an recession since 2014, when oil prices plumited. The Russian debt to GDP ratio is still very low though: below 20%, compared to over a 100 for the United States. This is because Russia had a huge stash of cash before the recession, which has shrunk from over 91 billion in 2014 to 32 billion. If this trend continues at some ...


3

Consider that you want to purchase a product from a EU country, pricing their products in Euros. Let’s say that you want to buy a product that costs 100 euro. No matter what the relationship is between USD/EUR, the product will still be 100 EUR. Let’s say the USD/EUR is 1.24 as in your example - that means for every 1.24 USD you have, you get 1 EUR. If you ...


3

If you had 12,000 dollars owing on a loan, 10,000 dollars cash in the bank and 1000 dollars monthly expenses, but you weren't sure if incoming cash flow could stop for 6 or 12 months, any time, with no notice, would you deplete your entire cash stock to reduce debt? At that point, if your next paycheque was a week late, you would go hungry. Or, assuming ...


3

To the best of my knowledge, there isn't. Ant that is actually a good thing, the economic structure of a country is usually a fairly complicated thing to be able to simplify it with a single number. You could, on the other hand, create an aggregate of measurements and try to look for patterns, e.g. you can see the behavior of macroeconomic variables such as ...


3

As we have discussed in the comments, the utility function used in the book is Cobb-Douglas: $U = CM^{\mu}A^{1 - \mu}$. The well known fact mentioned in equation (3.3) on page 57 - the one that you highlighted - is that the Cobb-Douglas utility function is homothetic - the share of total income spent on any of the goods is constant over all possible incomes. ...


2

If PPP holds, so does the LOP. The law of one price (LOP) is an economic concept which posits that "a good must sell for the same price in all locations". The law of one price constitutes the basis of the theory of purchasing power parity and is derived from the no arbitrage assumption.


2

The answer is somewhat. Those terms were not part of the original bond but were added by the Debt Agreement The Conference recognised the principle that the transfer of payments under the Settlement Plan implies the development and maintenance of a balance of payments situation in which those payments, like other payments for current transactions, can ...


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