Expert level questions which do not arise prior to graduate studies in economics.

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### How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem?

How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem? In Duffie's book "Dynamic Asset Pricing," he outlines the "Martingale method" of solving ...
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558 views

### Stochastic growth in continuous time

Literature: See Chang (1988) for theoretical part and Achdou et al. (2015) for numerical part respectively. Model Consider the following stochastic optimal growth problem in per capita notation. \...
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### Barro's (2009) rare disaster model in the AER: How to derive equation (10)?

In Barro (2009) Rare disasters, asset prices and welfare costs Barro develops a Lucas tree model with Epstein-Zin preferences. My question concerns the paper's equation (10). In this equation Barro ...
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How would an informed reader typically go about reading a mathematically rigorous academic article in economics, with lots of notations, assumptions and postulations (e.g, a typical article published ...
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I have encountered the equilibrium concept of "Stackelberg leader-leader equilibrium" while reading Product Line Rivalry (AER, Brander and Eaton (1984). They say "we define a Stackelberg strategy as ...
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844 views

### What are estimates of the elasticity of demand for credit with respect to interest rates?

When interest rates go up one percent (not one percentage point), what happens to demand for credit? I've only been able to find two papers in this area: Gross and Souleles (2001) study credit cards ...
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### Did previous researchers fail to detect the hot hand simply because of a statistical fallacy?

Many basketball fans/players believe that having made several shots in a row, the next shot is more likely to go in. This is sometimes called the hot hand. Starting (I think) with Gilovich, Mallone, ...
1k views

### Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
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### Does risk aversion cause diminishing marginal utility, or vice versa?

Let $A$ be the set of possible states of the world, or possible preferences a person could have. Let $G(A)$ be the set of "gambles" or "lotteries", i.e. the set of probability distributions over $A$. ...
2k views

### Take-it-or-leave-it PBE

I've found an interesting question looking at perfect-bayesian-equilibrium. I haven't seen a question where beliefs are not discrete. There is a single potential buyer of an object which has zero ...
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### Piketty's Return on Capital

How exactly does Piketty et al's method (as in his book) for computing the interest rate over time and countries work? I know that they use reported tax returns, and that some criticize them for also ...
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828 views

### Is there a way to link Berge's theorem of maximum to Envelope theorem?

Berge's theorem states Let $X \in \mathbb R^m, \Theta \in \mathbb R^n$, $f : X \times \Theta \to \mathbb R$ be a jointly continuous function, $C : \Theta \rightrightarrows X$ be a continuous(both ...
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### Solving Kaplan and Menzio: Shopping Time

Kaplan and Menzio's shopping time model is a search&matching unemployment model where we, for a steady state equilibrium, need to determine to variables: $J$: Value of a worker $u$: unemployment ...
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440 views

### Muth exposition of the rational expectations hypothesis

I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that ...
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### Optimal consumption in Merton-like portfolio choice model with constant wage

My Questions Consider the following problem. It is almost identical to the classic Merton portfolio choice problem. Here I'm solving it using the so-called Martingale method. I have provided my ...
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216 views

### What is the usefulness of approximating an optimal decision rule that close enough to steadystate in RBC model?

I'm reading understanding real business cycle by Plosser. Here's my crude understanding: For a RBC model, the FOCs of lagrangian together with transversality condition usually forms a nonlinear ...
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143 views

### Interchangeability between knowing an event obtains with probability 1 and knowing an event obtains with absolute certainty?

In the literature of interactive epistemology, for a player, knowing an event obtains with probability one and knowing an event obtains with absolute certainty are different. Is there a nontrivial (...
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236 views

### Splittet Value Function and Hamilton-Jacobi-Bellman equation

General Problem Let $k\in\mathbb{R}_+$ be the state variable, $k=k^*$ a fixed point (saddle) and $v(k)$ a value function. The problem is, that the value function has two distinct functional forms, ...
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265 views

### Has any progress been made on the Pacman Conjecture on Finite Time Horizons?

The Pacman conjecture states that the optimal strategy for monopolistic durable goods manufacturers is to set price high and slowly drop it (i.e. eating their way down the demand curve). Empirically ...
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### Does julia's speed advantage over python make any difference for DSGE modeling?

When compared to Python the main selling point of Julia is its speed as it is often argued. However, from my own personal experience I never noticed any significant difference in speed between Julia ...
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193 views

### Are there conventions in economics for coding the distance between states?

I know there are lots of gravity models in economics that take as an input distance between countries. My understanding is distance is typically coded based on the distance between capital cities, ...
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246 views

### Optimal price function: application of calculus of variations

The problem, I am trying to solve is based on the paper by Rochet and Vila 1994 (see literature below). In fact, it is a variant of the seminal paper of Kyle 1985 in the finance/economics literature. ...
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140 views

### Is there any article or paper that describes what Thomas Sargent thinks of New Keynesian economics/models?

Is there any article or paper that describes what Thomas Sargent thinks of New Keynesian economics/models? I am asking this question, because we all know what Thomas Sargent thinks of Old Keynesian ...
271 views

### Solving Leeper (1991) model

I am attempting to solve a variation of Leeper's (1991) model, which deals with the FTPL. This is what I have done so far: The utility function is $\log(c_t)+\delta\log⁡(M_t/p_t)$. I obtain two ...
139 views

### Gali and van Rens: The Vanishing Procyclicality of Labor Productivity

Let's see how questions like the following are taken here. Gali and van Rens, 2014 show that empirically, the correlation between $Y, Y/L$ has been declining over time. In fact, it only was a "real ...
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288 views

### Learning post-keynesian and marxist economics

My question here is not about theory, but more about the teaching landscape. I'm currently learning economics in Canada, and I realize that the academic world is very homogeneous. I'm quite impressed ...
123 views

### If $a$ and $b$ are two pure rationalizable strategies, can $0.5a+0.5b$ fail to be a rationalizable strategy?

It is easy to see that if $\sigma$ is mixed rationalizable strategy, then a pure strategy $a$ such that $\sigma(a)>0$ is also rationalizable, but it seems not vice versa. For a two-player finite ...
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### Housing Supply Elasticity: Proxy for Exogenous House Price Movements

Mian and Sufi (2014) say We use individual and zip code level data, and exploit cross-sectional variation in house price growth to estimate the impact of rising home values on borrowing and ...
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745 views

### One-shot deviation principle for infinite repeated games and dynamic programming

In a context that future return is discounted by a constant parameter, one-shot deviation principle holds for both repeated games and dynamic programming. Because, in repeated games, a one-shot ...
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### Are there some nice properties for a finite two-player game having an increasing differences utility and a decreasing differences utility?

Nice properties of the set of Nash equilibria can be shown for supermodular games(see here). But for a two-player game in which Strategy spaces for two player, $S_1$ and $S_2$ are finite, and both ...
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### What can we know for sure among ambiguous impulse responses in RBC?

I'm trying to understand the section on responses to productivity disturbances in Understanding Real Business Cycles by Plossor. It seems to me ambiguity of representative agent's response in ...
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### Using web scraped data for consumer price indices

Is there information and literature regarding comparative consumer price index methods? Specifically, the web scraping method of index construction?
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### Firm Sizes over the business cycle

There has been a lot of evidence about the firm size distribution (as measured in employment) being Pareto (see for example Luttmer 2007), but what are the properties of this distribution over the ...
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100 views

### Where to find the latest statistics of brain drain in the world?

Where to find the latest statistics of brain drain in the world? I would appreciate your suggestions.
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### Survival Rates of Firms

Jovanovic (1982) cites Du Rietz (1975) as a source for Survival Rates of smaller firms are smaller than for larger firms It's his doctoral thesis, and using Swedish data. Is there any recent ...
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