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Questions tagged [economic-growth]

An increase over time in the quantity of goods and services produced within an economy.

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Are there economic models that predict (only) a medium/long-term negative effect of protectionism?

Going by some ECB models/estimates from last year, protectionism would result in negative consequences pretty fast, e.g. For illustration, I will use the results of simulations carried out by ECB ...
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Does migration exacerbate (albeit delay) the problem of aging, economically-inactive populations in Western societies?

As a layman, I've always understood that there is a general consensus amongst economists that "immigration is economically beneficial" to rich Western countries (like Britain) who have aging ...
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How long did it take before the Hawley–Smoot Tariffs reached their peak effect on US growth?

I understand that this may still be a contentious issue, but are there some estimates how long it took before the Hawley–Smoot Tariffs impacted US growth significantly and/or how long it took for them ...
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What is the difference between a growth shock and a productivity shock

In a RBC context, what I mean by growth shock is a total factor productivity shock that follows a stochastic trend $ln(a_t) = ln(a_{t−1}) + \gamma + \epsilon^a_t$. I.e. the technology $a_t$, has a ...
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How exactly does removing labor​ market rigidities reduce structural unemployment and increase potential output in an economy?

Here I want to focus primarily on the potential benefits of labor market reforms such as a reduction in job security and trade union power and not their controversies. I wish to learn a few thoroughly ...
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[Graduate Macro]Land in the Economic Growth Model: CES Function

I am an undergrad student trying to study grad macro. I have been trying to solve exercise problem in Barro's economic growth. The model is about adding land in the Ramsey Model. The model goes as ...
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The maximum sustainable yield model: clarifications

I would like your help to understand the Maximum sustainable yield model. This is what I understood with some questions. We consider a population of individuals who are born, possibly reproduce ...
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Different explanation for economic growth, depending on the length of the period considered

I'm being introduced to macroeconomics, and a colleague asked why do we say that in the short term the productivity of a country is determined by the "demand side" (IS/LM model) while in the long run ...
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Equity and increase in sales

I am reading this book shoe dog by phil knight. There is mention of equity in one of the pages where the banker says *Your rate of growth is too fast for your equity * It is very confusing. From ...
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Why is an inverted yield curve NOT a good predictor for recessions except in the US?

I am trying to better understand the mechanism (if there is one) behind an inverted yield curve predicting - or causing, as some would argue - a recession. In order to do that, I'm trying to ...
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Stock market's obsession with growth of all companies?

I understand the stock market is a useful place to gain capital which allows further growth of a company. But it seems to me that even companies that have been on the stock market a while, appear to ...
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What are some common causes of jobless growth?

While "jobless recovery" is often discussed in the aftermath of recessions in Western countries, it seems it's always a short-lived phenomenon. On the other hand, it looks like in other parts of the ...
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Global stability in a ramsey growth model with multiple equilibria

Let's say that we have a model with multiple equilibria. $c$ refers to consumption and $S$ refers to natural capital stock. The dynamics that describe the economy are as follows: $$\dot{S}\left(t\...
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Predicted recessions that never happened

It seems generally accepted that recessions are hard to forecast, in both onset and intensity, but the bias seems to be toward rosy outlooks: The main finding is that, while forecasters are ...
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Is weak global economy always a “headwind”?

In the most recent (Mar. 20, 2019) FOMC Press conference, Powell said this: So, global economy was a tailwind for the United States in 2017. That was the year of synchronized global growth, and ...
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Overlapping Generations model: Social Planner solution

Assume we have a model of OVG where there are 2 overlapping generations, youngs and olds, the agents are two period living. The utility function is logaritmic, and the production function is Cobb-...
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Here's a question about the solow model [closed]

At first, I was confused by how y keeps increasing after depreciation exceeds savings, then I finally found what was truly bothering me. The fact that when depreciation exceeds savings, capital per ...
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Does brain drain really affect a nation's growth trajectory?

Take India as an example. India has been losing most of its bright minds to the west. India also ranks low in development. I would like to get a definitive answer to this cause-effect type question. ...
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The growth rate in the Solow model

Consider a very simple version of the Solow model with discrete time, a fixed population size and no technological progress (a fuller description of the assumptions is outlined here). Capital is at '...
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German economic growth in 20th century

I have question regarding this great animation: Animation: The World’s 10 Largest Economies by GDP (1960-Today) Why did Germany GDP shrink so much from 1995 to 2000, while US was still growing very ...
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How to Calculate the productivity multiplier?

Given a Cobb Douglas $Y_t = A (K_t^\alpha L_t^{1-\alpha}) $ $ K_{t+1} = sY_t + (1-\delta) K_t$ How do we get the multiplier on productivity to be equal to $ \frac{1}{1-\alpha}$? I understand ...
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Logs and percentage change in equation

Suppose I have the following relationship between output $y$, capital stock $k$ and total factor productivity $tfp$, $$\frac{\partial y}{\partial t}=\frac{\partial k}{\partial tfp}*\frac{\partial tfp}...
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The dynamics of c and k in Ramsey model (using the phase diagram)

I am having hard time understanding the dynamics of c and k using the phase diagram, the arrows don't make any sense to me. Any explanation will be a lot of help using the equations given. Thank you.
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gdp growth outliers reflect exchange rate variations

I have nominal GDP for 20 countries and I need it in dollars. I noticed that some observations like Belgium 1986 are havily influenced by exchange rate variations so that we have real GDP growth of 45%...
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Dot over a variable, Neoclassical growth model?

Looking at the Neoclassical growth model, I have hard time understanding what dot over a variable mean? I know it is short for taking the derivative with respect to time, I don't understand the ...
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Economic interpretation of a CES production function

I am following a paper where a production function of this type is used. $$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$ It is a ...
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Positive effects of a Tunisia-EU free trade agreement?

Tunisia might be signing a free trade agreement with the EU very soon. It's called ALECA or DCFTA. Many activists and labor unions are opposing such an agreement because it would result in losing ...
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Best financial model to proportionally distribute the company's income to all employees?

I'm planning to start a project of something "innovative". And among some of the parts of the project that I'm thinking about, it's in the term of how money (profits) should be distributed. The truth ...
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1answer
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Why are we using exp(.) as the functional form in the household maximization problem inside the RCK model?

Currently I'm studying the RCK model at my Advanced Macroeconomics I classes. A question arose almost immediately when I saw the utility function of a household in this model. The question is: why ...
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1answer
28 views

annualized quarterly growth rate calculating

I was using R to calculate the annualized quarterly growth rate of real GDP by 400*diff(log(rgdp)). If I perform in this way some of the percentage change is big. However, if I calculate as 100*diff(...
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1answer
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Wealth Creation: Where does the money come from?

I'm trying to better understand wealth creation– let's use trade as an example. I've bought a cup for \$2 and sold it for \$10. We've "created some new wealth" there– but without a net increase in ...
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The Effects of Demonetisation

I do not wish to get into the details of the Demonetisation implemented by the Indian Government on 8th November, 2016. Endless political debates have already been conducted advocating or berating ...
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falling household savings

While reading Mazzucato's "The value of everything", I come across this The rise in private debt in the US and UK has resulted in household savings falling as a percentage of disposable income - ...
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How does the economy of a city work?

I'm interested in learning how the economy of a town is analyzed. For instance, some occupations serve only people in the town, for instance the town grocer, baker, restaurant, dry cleaner, etc. Their ...
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How is the GDP growing when nothing else seems to be?

We've had strong GDP growth all three quarters this year. To me, that would indicate that, in at least some areas, we should be seeing growth. However, from my extremely ignorant armchair, it doesn't ...
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Negative growth rate with positive job growth

As per CARE RATINGS for India, in FY18 half of the formal sector firms are showing negative sales/growth but positive job growth? Explain please.
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Unsure how to go about computing GDP for the following problem

I came across this question where the GDP for the years 1995-1997 is given. Then I was asked to compute the growth rate every year which I'm aware of.The next question was to compute the average which ...
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What's a « 1-Ratio» ? From a text on Capital's share of GDP

In this article, the writer talks about the «capital share, as a percent of GDP — here just 1 – labor share percentage» What's this 1-labour share percentage?
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Why is entrepreneurship a factor of production?

I'm a student at a faculty of economics. The professor asked us a question to which I still can not find an answer, which is why entrepreneurship is part of the production factors? I would be very ...
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I can't find (lny-lny0)/t meaning [closed]

I cannot understand what (lny-lny0)/t means. Of course we use this to show growth rate. But in the mathematical sense, I cannot know what it is. Is it diferrentiaion?
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Empirical implementation of Milbourne et al's 2003 model of growth for time series data

I'm interested in testing the relationship of public investment in human capital and infrastructure, and the rate of growth of the GDP for Colombia, during a 20 years period. Given that I'm only an ...
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54 views

labor share and growth

Is there a link between the level of the labor share and growth? In standard models growth is the rate of (labor augmenting) technical progress and labor force. So does that mean if the labor share ...
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2answers
37 views

A maximization program expressed by per capita variales - Ramsey model

I have a problem to be maximized with the following program $$max\int_{0}^{\infty}\left\{ u\left(C\right)+\beta S^{\chi}\right\} e^{-\rho t}dt$$ s.t $$\dot{K}=AK-C$$ $$\dot{S}=\left(1-S\right)S-\...
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1answer
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Ramsey growth model - per capita vs aggregate variables

I am reading a paper Okuguchi,1981 with a Ramsey growth model. There is a constant population growth $n$ such as $L(t)=e^{nt}$. The way he writes the Hamiltonian is quite interesting (equation 5 on ...
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Economic history/geography of the UK (1960-today)

I am not an economist and I am looking for reference knowledge about how the economy of the UK (mainly focussing on England/Scotland/Wales) developed over the past 5 decades. The kind of information I ...
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3answers
109 views

Why is a Normal Yield Curve a sign of a healthy economy?

I think the question is pretty self explanatory. I'm just trying to understand the logic behind why an upward sloping yield curve indicates a good economy?
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1answer
70 views

Perpetual Youth Model

I am reading the famous paper of Blanchard,1985. There are some fundamental stuff that I did not really get. 1) Why they call it "perpetual youth"? 2) On page 225, he mentions the cohort size. So, ...
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Nominal Growth rate above Nominal Interest Rate

I'm reading Ray Dalio's "An In-Depth Look at Deleveragings", and at one point he's talking about central banks providing liquidity and credit support, and he states: "This produces relief and, if ...
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1answer
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Devising a model for inflation for a closed points system

I am working on a project that involves points. The idea is that users will earn points and redeem them for certain rewards. The means via which the users earn are fairly limited (They can attend a ...
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Optimal Time-Consistent Fiscal Policy with Finite Lifetimes

I am reading Optimal Time-Consistent Fiscal Policy with Finite Lifetimes by Calvo and Obstfeld. Here is the paper : Calvo and Obstfeld (1988) In fact, their model consists of two stages. In the ...