Imports impact the economy in several aspects. For example, at the micro level, imports affect competition by increasing supply in the domestic market. Consequently, there is more pressure on prices and profitability in the domestic market.On the
Exchange Rate
Why Countries Import: A Look at Factors Affecting Imports
Availability is one of the fundamental factors affecting imports. We import goods from abroad because they are unavailable in the domestic market. For example, the domestic economy does not produce them because the geographical location does not
Foreign Exchange Reserves: A Nation’s Economic Shield for Economic Stability
What's it: Foreign exchange reserves are liquid assets denominated in foreign currency held by the central bank or government for future use. This includes reserves in hard currency (such as dollars, euros, and yen), government securities
Real Exchange Rate: Understand Currency Values & Trade Impacts (Formula, Calculation, Determinants)
What's it: The real exchange rate is the price of one currency against another currency adjusted for differences in the price levels of domestic and foreign prices. The aggregate price level measure is inflation, which shows you the currency's
Purchasing Power Parity Explained: Unveiling True Costs (Calculation, Pros, Cons)
What's it? Purchasing power parity (PPP) is an economic concept for equalizing the price of a set of identical items across different locations. In other words, these goods should be priced at the same level in various countries.The concept works
J-Curve: Devaluation’s Impact on Trade + Its Application in the Private Equity
J-Curve throws a curveball at our intuition. It's a graph shaped like the letter "J" that depicts a surprising trend: sometimes, things might get worse before they get better. This concept applies to two key areas of finance: international trade and
Currency Appreciation: Causes, Impact on Trade, Exports, Imports & More
What's it: Currency appreciation is when the exchange rate of one currency against another currency increases. One unit of currency can buy more of another currency.Appreciation makes foreign products cheaper for domestic buyers, thus
Understanding Currency: History, Types, Exchange & Global Impact
What's it: Currency refers to the money accepted and used as legal tender in a country. It includes banknotes and coins you use daily. The central bank or authority acts as the sole supplier and monitors its circulation in the
Triangular Arbitrage: Exploit Currency Inconsistencies (Risk-Free Profits?)
What's it: Triangular arbitrage is the simultaneous buying and selling of three different currencies and attempts to exploit inconsistencies between their exchange rates. Profits can arise when the cross rates of the three currencies do not really
Spot Exchange Rate: Meaning, Affecting Factors, and How It Works
The spot exchange rate, also known simply as the spot rate, is the current price at which one currency can be traded for another for immediate delivery. This rate is crucial for anyone involved in international business, finance, or simply traveling
Dollarization Explained: How It Works, Example, Pros, and Cons
What's it? Dollarization means adopting the U.S. dollar as a currency and unit of account by countries other than the United States. The term also has a broader meaning: the adoption of foreign currency by a country other than its issuing country.
Pure Floating Exchange Rate: Flexibility & Volatility (Pros, Cons)
What's it? A pure floating exchange rate, or free-floating exchange rate, is a system of exchange rates in which the value of a domestic currency against a foreign currency moves according to a market mechanism. The market mechanism is the