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2

Your model has $\beta_3 * t$, which is a linear time trend, not time dummies. If that's correct, you are controlling for only a linear trend. Because oil prices do not have a perfect linear trend, you can include them. But I am not sure you really want the linear trend specification instead of time dummies (say, $\beta_{3t}$). For a model with common time ...


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Quote... "Suppose the PBOC buys a bunch of dollar-denominated bonds, using its dollar reserves. All else equal, what effect should this have on the yuan-USD exchange rate?" Quote... " I am having trouble seeing whether or why it might cause the yuan to depreciate". All else is not equal. To return to the original quantity of USD money ...


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The title says this question is about "financial markets". The body of text does not contradict that although Bitcoin is the only example discussed. If the question is about financial markets then the answer is that there are examples of markets segmented by currency. For example Cameco is 20.23 CAD and 16.16 USD as of 4PM today. On Yahoo the ...


22

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 make money by exchanging your BTC for USD, exchanging the USD for SEK, and then exchanging the SEK for slightly more BTC than you started with - then someone else ...


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A quote would be on an exchange, and currency involved is whatever is specified on the exchange. There may be multiple exchanges - with different prices. (Price deviations between markets for financial assets are normally small, but that depends on the exchanges being liquid.) Data providers translate those quotes to other currencies based on the appropriate ...


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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 term in economics that might be helpful in describing what's going on: "Market Segmentation." This is a topic that is often studied in the asset ...


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But it still raises the issue: how does e.g. a US consumer get their hands on digital Yuans with which to pay something that they buy directly from China (e.g. via Alibaba)? Any exchange that would sell those digital Yuans that would have to take dollars in, no? Not necessarily dollars... you could sell anything to China in exchange for some Yuans. If you'...


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There is an economic literature on optimal currency areas. However, that is related to the adoption of a single currency. As described in the question, a basket is just a new asset that is a weighted allocation to underlying currencies. Once the weightings are fixed, the fair value of the basket is the weighted value of the component currencies, which can be ...


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