love=economics

I studied quite a bit of economics early in my college career and it never ceased to amaze me how easily the principals of economics can be applied to love. We all have our exchange rate. We all have value. We all have our own currency. Now, if only it were easy to apply the equations that are so readily available in economics to love. There would be a lot less heartbreak, and a lot more nerds understanding the fairer gender.

So, are the exchange rates in love more flexible than economics? Can we look past things that would normally decline value if the end result is a gain? We all have baggage. No one escapes childhood or past relationships completely unscathed. I feel like baggage is more easily tolerated if the person has a lot of other great qualities. You have to redeem yourself somehow, ya know? Inflation rates are soaring!

Now if we are talking about exchange rates we must cover currency risk management(heartache). Each subject (mate) has a relevant type of risk management when considered in the context of exchange rate exposure. These risks become relevant when compared as performance measures(outcomes). A good economist(boyfriend/girlfriend) would implement specific currency risk management policies (standards). I think we can all agree there would be favorable impact on the currency with positive currency exposure and fund (relationship) performance. A better performance in the relationship would lead to inflation.... and room for error. So while it's important to keep your exchange rate high (no one wants to have a cheaper rate) it is also important to maintain positive exposure.

Lastly, I was always intrigued by studies that focused solely on volatility (which is often viewed as a negative since it represents uncertainty and risk) and just assumes it will be unaffected by other endogenous (supply and demand) variables. What bothers me is that it implies that the effect of trade on volatility is assumed inexistent rather than
jointly estimated with the effect of volatility on trade (all of these factors can be extremely volatile!). Basically all the studies we looked at in school agreed that shows a strong positive relationship between real time exchange rate volatility and distance between trading partners(lovers). Since distance has been proven not to be affected by volatility, this strong relationship suggests that greater distance between countries(again, lovers) increases the exchange rate volatility through the effect of distance on the *intensity* of relationships in trade. This sample proves that in fact, distance does make the heart grow fonder. Distance does not directly affect exchange rates... in love.