22 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

It's not clear what level of answer you're looking for, so here is a much more basic answer. There are indeed many exchanges with many different prices. However, if you have noticed that you could ...
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17 votes
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Why are imports subtracted from GDP?

When we import something, we consume it. So when calculating consumption we are bound to count import as a positive component of GDP. Since it is not (we did not produce imports domestically), we ...
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16 votes
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Have there been instances where economists have advocated a trade embargo?

Free trade is, on the whole, one of the few otherwise controversial policy topics on which economists have near-perfect consensus. Historically, this consensus has long been strong in the English ...
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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 ...
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  • 6,652
12 votes
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How does a country devalue its currency?

Typically, a devaluation is achieved by selling the domestic currency in the foreign exchange market and buying other currencies. Suppose China sells one trillion Renminbi and buys 157 billion US ...
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  • 16.6k
11 votes
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Are there any states that don't have debt?

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 ...
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  • 1,428
9 votes

How does US (its economy, banks, industry) profit from dollar being the "standard currency"?

Some major benefits include: Seigniorage on currency acts as a source of government revenue, allowing for lower taxes and higher spending. One paper (Neumann (1992)) puts this at about \$15 billion a ...
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  • 15.9k
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 ...
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  • 26k
8 votes

Are financial markets "unique" for each "currency pair", or are they simply "translated"?

Economic analysis always requires making some assumptions at some point. The assumptions that you make should try to fit reality the best that they can. Regarding your specific situation, there is a ...
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  • 9,107
7 votes
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Generalization of the Heckscher-Ohlin Model

The HO model has been generalised. Vanek does a good job of it. Instead of only two countries, there is an index of countries. There are many industries. Identical technology Identical, homothetic ...
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  • 3,721
7 votes

Why are imports subtracted from GDP?

One way to navigate rather safely in National Accounting Identities, is to put on the one side "what you have available" and on the other side "what you do with it". In the specific case ($M$ being ...
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7 votes

What are some critiques to the principle of comparative advantage?

One of the most common critiques is that the standard model is a static analysis. While a country might be better off today by focusing on its comparative advantage, its longer term prospects depend ...
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  • 1,346
7 votes

A valid argument against free trade?

I can get to more technical papers, but it's not a big secret what you have quoted. E.g. The Economist quotes MIT professor John Van Reenen: But just because the size of the pie expands [due to ...
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  • 3,730
7 votes
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Why do we spread knowledge across nations?

This is a long comment that is too long for the comment box. In fact, many research projects in US are secretive, especially the ones related to military. At the same time, much, much more research ...
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  • 1,620
6 votes
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Why do there seem to be relatively few imports from India into the United States?

India has significantly worse physical/logistics infrastructure than China, Japan, Korea and Taiwan, so it is difficult to produce goods in India because it's difficult to move supplies and product ...
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  • 558
6 votes
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Why don't prices of USA labor and Mexican labor equalise?

The underlying reason for persistent wage differences is probably that Mexican workers are less productive than American workers. It is sufficient that workers in some tradeable sectors are more ...
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  • 961
6 votes
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How is wealth created?

First we need to discuss what wealth is. Is it just the amassment of valubles? In the 16th-18th century, rulers thought so. This notion is called mercantilism. This idea was rejected by Adam Smith in ...
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5 votes
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How much of Greece's public debt is created by its trade deficit?

As an accounting identity, it is required that the current account surplus (deficit) + capital account surplus (deficit) = 0. This is known as the balance of payments (BOP) identity . So if Greeks ...
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  • 15.9k
5 votes
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Long term trade data request

Max Roser (2014) – ‘International Trade’. Our World in Data provides data on overall international trade growth during the requested time period, citing as their sources: International Historical ...
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5 votes

International shipping services count as exports?

It's complicated, and it is supposed to depend on where the ships are generally operating from, rather than the country of the firm that owns the ships or the flag under which they are flown. Under ...
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5 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 ...
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  • 26k
5 votes
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Gravity Equation Interpretation

My understanding is that the gravity equation can be derived from different settings. You can assume that each country 1/ produces only one product. This is knwon as the "Armington assumption" as in ...
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  • 6,652
5 votes
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Which currency is preferred when countries with different currencies purchase imports/sell exports?

There isn't a typical answer. The vendor may want paying in whatever currency represents the highest proportion of their costs, as this reduces their currency risk. But there may also be ...
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  • 7,992
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 ...
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  • 6,652
5 votes
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Is a 'Brexit' really that bad?

tl;dr: Uncertainty & trade tariffs detail The economics have been assessed by a large number of economic specialists, including the very well-respected and independent Institute for Fiscal ...
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  • 7,992
5 votes
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Who exploits comparative advantage in international trade?

It's fine to make a supposition that it costs Colombia twice as much to make cars as coffee, and Japan twice as much to make coffee as cars. It's also fine to express these ratios in terms of the ...
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  • 6,693
5 votes

Does China subsidize its exports?

World Trade Organization (WTO) rules prohibit export subsidies and China joined the WTO almost 15 years ago (in December 2001). As a condition of membership, China had to eliminate export subsidies in ...
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  • 6,652
5 votes
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Are there plausible scenarios for the U.S. dollar to fall out of use as the world's reserve currency?

There are many plausible scenarios in which the dollar ceases to be the de-facto currency. They all have a few things in common. For people to stop using dollars for international trade, there would ...
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  • 806
5 votes
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Does trade lead to economic growth in the most basic models of trade?

It depends on how you define "growth". Trade models have multiple goods in them, so there's no unique way to define "growth" - you are just moving along a fixed production possibility frontier. You ...
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  • 671
5 votes

Why is Algeria the #2 milk powder importer in the world?

Four-fifths of Algeria is just desert --which leaves no room for agriculture. The Algerian economy is mostly powered just by the oil industry, which contribute about ~70% of government revenues. Oil ...
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  • 780

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