Thəorətic Muslim
SENIOR MEMBER
- Joined
- Feb 5, 2012
- Messages
- 5,006
- Reaction score
- 17
- Country
- Location
hehe....how far are you in school wise?
Retaking Macro, since B- (84 or less) isn't allowed, then finished my Applied Econ Masters.
Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
hehe....how far are you in school wise?
Retaking Macro, since B- (84 or less) isn't allowed, then finished my Applied Econ Masters.
When will the census results be released btw?
IMF has a "weird" way of applying exchange rate to their calculation for USD nominal. I believe they weight it by many currencies according to the trade you do (i.e not all trade is done with the US) with them (and their effective exchange rates with the USD come into play). Its why I believe when you look up say India's figures (which do have published nominal estimates up to 2021)...the actual divisor (exchange rate with USD) comes to a figure lower than the one we see on the forex market because INR is not as undervalued with India's other major trade partners compared to the USD. It's sort of like semi-bringing in what PPP does but in the trade/forex realm.
So the IMF publishing of the Pakistan nominal USD size when it comes out (they don't tend to do estimates for Pakistan for some reason)...will probably be different to 313 billion and which side it is on will likely indicate the PKR strength vis-a-vis its other major trading partners currencies compared to its strength with the USD.
New Recruit
Hi bud,
Excuse my ignorance, as I don't come from an economics related background; I have a very rudimentary knowledge about this type of stuff.. Thus can you shed some light on what are you're professing about the Pakistani GDP economy-in layman terms?
Thanks.
@Nilgiri
Bro i have got a ques, when calculating Indian economy with an avg nominal growth rate of 7% and inflation at 4% and keeping rupee constant we see India adding approx $200bill , however in the same time frame UK's economy with a growth rate of ~1% and with inflation at around 2 was able to add same amount ($200bill), how does that work? Whats the math behind that?
Well how much you can buy of something with something else depends on the demand and supply of both. Higher demand there is of what you want to buy, the more of the "something else" that you need.
This also extends to the forex market (where the item you are trading is currency). The demand and supply of the currencies on this market relates to the demand and supply of the goods+services you supply and demand to the international market (which is why a forex market exists in the first place given different countries print different currencies for use with their goods/services).
So when you want to convert what you count as total consumption/production in your country from the currency your govt/central bank prints (in Pakistan's case the PKR) to a currency another foreign govt/authority prints (often the USD)...there are a few issues inherent in doing so.
One could just take the spot rate (of USD/PKR) on the forex market and apply it as done in the first post...but this can present a few innaccuracies given Pakistan's trade is not fully composed of trade with the US (Pakistan's other major trade partners like Europe, China, Middle East etc). This means even though the trade with those countries is mostly done with the US dollar as intermediary, the cascade effects of using say the PKR to buy USD to then buy say Euro for Pakistan to import something from the UK are not fully realised. Hence to my knowledge the IMF operates a larger matrix of currency comparison baskets in its effective exchange rate with the USD for each country....which is different from the spot rate.
I did a comparison really quickly to get an idea of the difference (never really looked into it for the PKR before) between averaged out spot rate for a year compared to what the IMF used to convert on its end for USD/PKR and I got this for last 3 full (IMF) fiscal years:
But as you can see the differences are not going to be so big given the USD is largely the global currency...but discrepancy can be on either side (around +/- 2%)....but the biggest difference from a monthly spot rate can be around 5 - 6%.
Using a spot rate for 2017 right now, has a larger factor in how that current "snap" spot rate holds true for the full year (2017 is ongoing)...as IMF averages the full year's exchange rate data (with whatever basket coefficients it uses) when it converts from temporary estimate to its final estimate (can take 1 - 2 years sometimes).
IMF for example is predicting around a 69 INR/USD rate for India in 2017, but the INR has gained to around 64 for a month plus for example....so if it holds there or decreases further....the final IMF nominal conversion to USD may be higher than what IMF has estimated right now.
In nominal what matters in the end is the exchange rate (normally to USD)....the country's real growth, inflation etc all have varying footprint on what finally registers in terms of USD (it is especially variable with developing countries sometimes).
Some 8 years back for example, India grew by 30% in just one year (2009/10) in USD terms...adding around 350 billion USD on a nominal USD base around half of what it is now.
Hence this is another area where PPP performs better in cross country comparison....it has much greater overlap with the "real growth" citizens on the ground see since it estimates internationally standardised volume based consumption....rather than extrapolating trade derived exchange rate to an entire economy (which can be quite a large extrapolation for developing countries).
Well how much you can buy of something with something else depends on the demand and supply of both. Higher demand there is of what you want to buy, the more of the "something else" that you need.
This also extends to the forex market (where the item you are trading is currency). The demand and supply of the currencies on this market relates to the demand and supply of the goods+services you supply and demand to the international market (which is why a forex market exists in the first place given different countries print different currencies for use with their goods/services).
So when you want to convert what you count as total consumption/production in your country from the currency your govt/central bank prints (in Pakistan's case the PKR) to a currency another foreign govt/authority prints (often the USD)...there are a few issues inherent in doing so.
One could just take the spot rate (of USD/PKR) on the forex market and apply it as done in the first post...but this can present a few innaccuracies given Pakistan's trade is not fully composed of trade with the US (Pakistan's other major trade partners like Europe, China, Middle East etc). This means even though the trade with those countries is mostly done with the US dollar as intermediary, the cascade effects of using say the PKR to buy USD to then buy say Euro for Pakistan to import something from the UK are not fully realised. Hence to my knowledge the IMF operates a larger matrix of currency comparison baskets in its effective exchange rate with the USD for each country....which is different from the spot rate.
I did a comparison really quickly to get an idea of the difference (never really looked into it for the PKR before) between averaged out spot rate for a year compared to what the IMF used to convert on its end for USD/PKR and I got this for last 3 full (IMF) fiscal years:
But as you can see the differences are not going to be so big given the USD is largely the global currency...but discrepancy can be on either side (around +/- 2%)....but the biggest difference from a monthly spot rate can be around 5 - 6%.
Using a spot rate for 2017 right now, has a larger factor in how that current "snap" spot rate holds true for the full year (2017 is ongoing)...as IMF averages the full year's exchange rate data (with whatever basket coefficients it uses) when it converts from temporary estimate to its final estimate (can take 1 - 2 years sometimes).
IMF for example is predicting around a 69 INR/USD rate for India in 2017, but the INR has gained to around 64 for a month plus for example....so if it holds there or decreases further....the final IMF nominal conversion to USD may be higher than what IMF has estimated right now.
In nominal what matters in the end is the exchange rate (normally to USD)....the country's real growth, inflation etc all have varying footprint on what finally registers in terms of USD (it is especially variable with developing countries sometimes).
Some 8 years back for example, India grew by 30% in just one year (2009/10) in USD terms...adding around 350 billion USD on a nominal USD base around half of what it is now.
Hence this is another area where PPP performs better in cross country comparison....it has much greater overlap with the "real growth" citizens on the ground see since it estimates internationally standardised volume based consumption....rather than extrapolating trade derived exchange rate to an entire economy (which can be quite a large extrapolation for developing countries).
@farhan_9909 do you post in forum anymore?
Retaking Macro, since B- (84 or less) isn't allowed, then finished my Applied Econ Masters.
Nice post bud, keep it upWell how much you can buy of something with something else depends on the demand and supply of both. Higher demand there is of what you want to buy, the more of the "something else" that you need.
This also extends to the forex market (where the item you are trading is currency). The demand and supply of the currencies on this market relates to the demand and supply of the goods+services you supply and demand to the international market (which is why a forex market exists in the first place given different countries print different currencies for use with their goods/services).
So when you want to convert what you count as total consumption/production in your country from the currency your govt/central bank prints (in Pakistan's case the PKR) to a currency another foreign govt/authority prints (often the USD)...there are a few issues inherent in doing so.
One could just take the spot rate (of USD/PKR) on the forex market and apply it as done in the first post...but this can present a few innaccuracies given Pakistan's trade is not fully composed of trade with the US (Pakistan's other major trade partners like Europe, China, Middle East etc). This means even though the trade with those countries is mostly done with the US dollar as intermediary, the cascade effects of using say the PKR to buy USD to then buy say Euro for Pakistan to import something from the UK are not fully realised. Hence to my knowledge the IMF operates a larger matrix of currency comparison baskets in its effective exchange rate with the USD for each country....which is different from the spot rate.
I did a comparison really quickly to get an idea of the difference (never really looked into it for the PKR before) between averaged out spot rate for a year compared to what the IMF used to convert on its end for USD/PKR and I got this for last 3 full (IMF) fiscal years:
But as you can see the differences are not going to be so big given the USD is largely the global currency...but discrepancy can be on either side (around +/- 2%)....but the biggest difference from a monthly spot rate can be around 5 - 6%.
Using a spot rate for 2017 right now, has a larger factor in how that current "snap" spot rate holds true for the full year (2017 is ongoing)...as IMF averages the full year's exchange rate data (with whatever basket coefficients it uses) when it converts from temporary estimate to its final estimate (can take 1 - 2 years sometimes).
IMF for example is predicting around a 69 INR/USD rate for India in 2017, but the INR has gained to around 64 for a month plus for example....so if it holds there or decreases further....the final IMF nominal conversion to USD may be higher than what IMF has estimated right now.
In nominal what matters in the end is the exchange rate (normally to USD)....the country's real growth, inflation etc all have varying footprint on what finally registers in terms of USD (it is especially variable with developing countries sometimes).
Some 8 years back for example, India grew by 30% in just one year (2009/10) in USD terms...adding around 350 billion USD on a nominal USD base around half of what it is now.
Hence this is another area where PPP performs better in cross country comparison....it has much greater overlap with the "real growth" citizens on the ground see since it estimates internationally standardised volume based consumption....rather than extrapolating trade derived exchange rate to an entire economy (which can be quite a large extrapolation for developing countries).
Much appreciated @Nilgiri
I took a few Economics courses at University in the early 90s, and that is why I gravitate to Economy section. There is dearth of factual and analysis-based approach in this section and I really appreciate your input. Please keep posting here.
Many posters come to this section to bitch about politics etc... and add no real value to discussion. Thanks again for presenting an analytical post.
Yes bro but i was busy for the last few months.
Nice post bud, keep it up
Future professor of economics at a prestige university hopefully !
Heh, masters are like that. Good luck man. Planning on doing something further after that or find work?