Exchange Rates

[Avaerilon]

Hi Everyone,

It may not be massively important and it may never come up in any major posts. But what would be interesting to know is:

What are the exchange rates of currencies in the SLU?

To do this, we'll need plenty of info from as many people as possible. If anyone here is good with maths or economics and could lead this, please tell everyone! Otherwise I'll look at some "Beginners' Guide to Exchange Rates" on the web.

Please let me know some key points:

1. Your currency
2. Your average economic score (what is appears to be the most often)
3. Your current score
4. Your main industry (if any)
5. Your principal exports to other SLU members

[North American Republics]

The idea does seem interesting. It could be compared with a standard currency or item and that comparison can allow for conversion to other currencies.

Example (if it makes any sense):

Right now, NAR's economic score is at 50 / 100. For the sake of this example, let's use the USD.

$ = USD
N = NARB

1.00 / (50.0 / 100 ) =N2.00

In this case $1.00 = N2.00
-----------------------------------------------
Currency value would be calculated with:

1 / ("economic score") = Value versus the $

where "economic score" is the value shown in it's entirety (X / 100)

----------------------------------------------
Nations would have to, by the end of the week, report their current score and that score would be inputted into the above equation. Then the equivalent exchange rate could be determined between nations (If the currency is dynamic). Otherwise, whatever the general trend seems to be would be acceptable and the rates would stay the same.
----------------------------------------------
Hope I helped.

PS I decided to Google the exact phrase Avaerilon used and found an About page that shows the general idea of what I had typed, available here.

PPS
*As of this post **Letters designate a fake currency character to each nation

$1 = N2 North American Republics

$1 = E1.47 Eggy216

$1 = A5.88 Avaerilon

$1 = M3.70 Millyland

$1 = P7.69 Peace Strivers

$1 = G1.52 Islamic Guiana

------------------------------------------------

N2.00 = E1.47 } 1 North American Republics to
N1.00 = E0.74 } X Eggy216

N2.00 = A5.88 } 1 North American Republics to
N1.00 = A2.94 } X Avaerilon

A5.88 = E1.47 } 1 Avaerilon to
A1.00 = E0.25 } X Eggy216

M3.70 = P7.69 } 1 Millyland to
M1.00 = P2.08 } X Peace Strivers

[Avaerilon]

This is brilliant NAR! Thanks for going to the effort to do this :)

[Avaerilon]

We should also try and factor-in the average economic score. Also, if we're going to use the US$ as a base, what would the current and average economic scores of the US be?

[North American Republics]

No problem. I don't think that it matters what we peg the value of our currency to, it would just be a point of comparison that we could use. Example:

1 ounce of gold = N2
1 Euro = N2
1 Yen = N2

If we wanted to we could create the SLU § and it would be worth the absolute maximum one could reach. No currency could go over the value of the SLU § ergo the economic score (X / 100) where the percentage is the economic worth of a maximum number.

[Avaerilon]

Sounds like an excellent idea.

[Deleted]

Damn it - should've listened more to economics in school :-/

[Millyland]

This is great- thanks Avaerilon and NAR

[North American Republics]

This is all self-learned, I'm only 16 XD.

[Deleted]

As a suggestion, 100 shouldn't equal one US $. The US $ should be 50 or 60 so that our currencies could be worth more.

[Deleted]

Also, good job NAR. I never really liked economics.

[North American Republics]

I think that the following works, just don't quote me on it :).

--------------------------------------------------------------
1.0 / (national percentage) = national currency per 1 USD

(national percentage) / 1.0 = USD per 1 national currency

^
|
US = 100/100
--------------------------------------------------------------
0.5 / (national percentage) = national currency per 1 USD

(national percentage) / 0.5 = USD per 1 national currency

^
|
US = 50 /100
--------------------------------------------------------------
0.6 / (national percentage) = national currency per 1 USD

(national percentage) / 0.6 = USD per 1 national currency

^
|
US = 60 /100
--------------------------------------------------------------
General Formula
(economic score as base) / (national percentage) = national currency per 1 whatever currency

(national percentage) / (economic score as base) = whatever currency per 1 national currency
--------------------------------------------------------------
Hope it helps and I hope that a more experienced person comes around.

[Kingdom of Grolsch]

As this is my first day here and my second day in NS, don't expect something perfect ;) However I will give this a shot, as dealing with this stuff is part of my job alongside university for 2 days a week.

NAR, your calculation is excellent. It is quite simple, but it works and over the long term your model reflects reality quite well.

One thing I would add to this discussion is the fact that the exchange rates of many countries in real life actually don't change that much due to the rate being set by the government or because the government sets a certain range in which market forces operate freely.

1. Fixed rates
Usually governments of non-democratic forms of government use a so-called fixed exchange rate, meaning the exchange rate is totally fixed and the rate is decided by the government. How often a rate change is made depends a lot. Some countries have had the same rate for years while in other countries, the government sets a new rate once a day.

This system can be used easily, you would just say my currency x can be exchanged by your currency y for amount z. No market forces or calculation of any kind involved.

2. Semi-fixed rates
Semi-fixed rates are rates which involve a combination of market forces and government intervention. In countries with a semi-fixed rate, governments permit the market to set the price of currency within a certain range. China is probably the best-known example of a country using this system nowadays.

A semi-fixed rate in NS could be a combination of, for example, NAR's calculation + or - a specific number to create a range (e.g. a band of 1.00 - 1.20). The exact rate could be a calculation or just an educated guess depending on recent events.

3. Floating rate
The floating rate is (in theory) a currency rate fully decided by market forces. In most economies nowadays governments tend to intervene a lot in the markets so the fully floating rate is gone now, but for example USD-CHF or EUR-USD rates are decided primarily by market forces.

NAR's calculation could be used to calculate a floating rate. It is a simple system, but it does over the long term reflect significant changes in a country's economy.

4. Basket system
In a basket system, a country's exchange rate depends on the value of other currencies and moves in the same direction. To make it even more difficult, this can be a fixed-rate or a floating-rate system. Some international organizations use a basket or a basket-like system, for example the IMF.

[North American Republics]

This is wonderful, thanks for coming on. What does everyone else think? What rate should we use?

[Deleted]

I like the semi-fixed rate.

[Deleted]

To be honest, I haven't a bloody clue but it's fantastic that we have guys here who know what they're talking about! :-D

Grolsch - it's great to have you on board!

[Avaerilon]

The semi-fixed is practical, as is the floating rate. I would personally prefer the semi-fixed one with regards to economic stability. Thanks to both Grolsch and the NAR for their obvious expertise and skill!

[Kingdom of Grolsch]

First of all, thanks for the warm welcome. Much appreciated :)

Personally I'd go with a semi-fixed rate, as it is more practical for us. Going with a floating rate would mean we'd have to recalculate the rate each and every time and the differences, as opposed to the semi-fixed rate, can be very significant. Semi-fixed rates do change a lot as well though, but the changes aren't very significant so we can say to keep the same rate several days if we want to and then make an adjustment of, say, several percent.

Ok we have 3x semi-fixed now...NAR what do you think?

[North American Republics]

Make it four.

[Administrator]

This sounds really cool everyone. Happy to know a lot of us understand this. Semi-fixed sounds like a good option

[Kingdom of Grolsch]

Ok that makes five people who go for semi-fixed. As nearly everyone who has been online the past 24 hrs has already voted, I'll see if I can make a spreadsheet so we can see what we want to influence the rates and what not. Ultimately we can then have a public spreadsheet on Google Docs so you can input your data and get an exchange rate calculated for you. Any input on this would be appreciated.

To get started, stuff that might be good to include in the calculation are:
- NAR's calculation for the calculation of the highest and lowest possible exchange rate of the semi-fixed range. NAR uses the economic rating only so this would be the "purest" minimum and maximum exchange rates possible (at least that's the theory...:P)

And to determine the exact rate:
- A way to take into account political freedom, civil rights and population size
- Private vs. public sector contribution to the total economy

[Kingdom of Grolsch]

Spreadsheet finished...feel free to change the numbers in the blueish cells and voice your opinion. Don't like the exchange rate? Ctrl + R generates a new rate, within the range of course. Actually it should change several times a minute but somehow the function I use for that doesn't auto-refresh in Google Docs so you have to do ctrl + R.

docs.google.com/spreadsheet/ccc?key=0AsPuCu-sj1g-dDBkcEtkdllHMmUtanMtOVdUYTBDNHc#gid=0

[Avaerilon]

Grolsch... wow. This is... brilliant. I'd throw you a party with streamers and fireworks and everything if I could! I like my exchange rate vs the good old Pound Sterling. I last checked it at 1.02 Aubs per Pound isn't bad!

[Kingdom of Grolsch]

Thanks. I like parties, but I have a snowboarding contest tomorrow so sorry :P

I can see why you like it, as you used 3 variables in the table where you could enter the Economic Score, Civil Rights and Political Freedoms but entered 66 in cell B35. 66 is entered when giving 2 variables a weight of 1 or more in the table, 33 when using 3 variables. I edited the title of the first row in the table for clarity. Now your exchange rate is 0.7260. Still like that?

EDIT: Edited more titles; added currency rate the other way round (nation B vs. your nation); added automatic exchange rate refresh when using backspace key in empty cell (guess better then ctrl + R for most people)

[Avaerilon]

Ah right, I see! I'm still happy with that exchange rate!

[Avaerilon]

This thread will now be locked, seeing as a working spreadsheet has been very kindly created by Grolsch, based on plenty of mathematical work by NAR and Grolsch. New nations: find the link in earlier posts and have a look at your exchange rates!

[North American Republics]

I am temporarily reopening this thread to see whether regional opinions have changed.

Here are two exchange rate models; one was created by Grolsch featuring a semi-fixed rate, and the other one I created just now featuring a floating rate (you can see the difference between the two here here). What do you guys think?

Grolsch's
North American Republics'

Edit: I personally feel that my model is easier to edit. ;)

Edit2: Someone would have to be dedicated enough to go through the participants' economy values to update my model everyday.

Edit3: Btw, both of our models can be edited by anybody.

[Avaerilon]

I'm still happy with both of them, but (at the moment) an Aub is worth more under Grolsch's model... ;)

[North American Republics]

Well... maybe if someone improved their economy, then perhaps their currency would be worth more under my model... ;)

[Avaerilon]

And sacrifice the environment? Ha! *Meanwhile, the Royal Bank of Avaerilon asks for a bailout...*