All Questions
Tagged with macro or macroeconomics
3,003 questions
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Relationship between interest rate and price level
I read that when interest rate goes up, price level tends to decrease as a result of consumption and investment going up. This implies that the two moves in opposite direction.
But at the same time, ...
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70
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Meaning of "structural" in VAR
I'm studying VAR model and I think there are two meanings of "structural" in VAR.
(1) Structural form model
In here, "structural" means the model that error terms are not ...
- 342
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15
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Long term bond yields determinants
Can you pls explain why long-term nominal interest rates should be around of the level of nominal potential GDP?
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Exercise 8.8 Ljungqvist and Sargent, Corner Solutions
This question is exercise 8.8 from Ljungqvist and Sargent "Recursive Macroeconomic Theory" 3rd edition.
I repeat the question here for clarity.
There is a pure endowment economy and two ...
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Determinants of long term interest rates
Can you pls explain why long-term nominal interest rates should be around of the level of nominal potential GDP? What would be the macroeconomic forces behind it?
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Consumption based asset pricing - covariance of consumption and returns impact on asset price
I'm reading about consumption based asset pricing model. I don't fully understand a basic equation below.
Let's start with the law:
$$
p_t = E_t\left[\beta \frac{u'(c_{t+1})}{u'(c_t)}p_{t+1}\right]
$$
...
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Recommend study material that treat economics the way Statistics and Accountancy are treated, with proof and calculations from real-life data
Background:
Recently, I was asked by a student to help with their college project where they were performing economic analysis of a LLC based on its annual report. I recommended the Cobb-Douglas ...
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47
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Counterfactual analysis in SVAR
Counterfactual analysis is used when we want to compare the actual IRF with counterfactual senario IRF. For example, if you want to examine inflation response to oil price shocks just ignoring the ...
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127
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Why are Western Europeans so much poorer than Americans?
According to https://en.wikipedia.org/wiki/Disposable_household_and_per_capita_income, PPP-adjusted median disposable income (so inclusive of cost of living, taxes, and social transfers) is ...
- 21
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76
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How to Apply the Bellman Equation with Two Control Variables in an Optimal Growth Model
I'm currently studying an optimal growth problem involving a representative consumer, and I'm having trouble using the Bellman equation when there are two control variables involved.
Specifically, I ...
- 371
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56
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Taylor rule in the context of the IS-LM model
In terms of the IS-LM model, what is the Taylor rule attempting to do?
Inflation goes above target when there's an output gap. This can happen as a result of an LM shock or IS shock.
LM shocks are ...
- 57
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20
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Descriptions of monetary policy and data
Monetary policy is described in terms of restoring output to potential output, or equivalently, in terms of adjusting the interest rate until it corresponds to the neutral rate of interest so that the ...
- 57
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14
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GDP and Imports in the Keynesian Cross model and beyond
I understand that when calculating GDP by spending, Imports are subtracted because we can't distinguish between the domestic and the imported components of C, I, and G.
But in the Keynesian Cross ...
- 1
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vote
2
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66
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Why do fiscal policies only shift the IS curve?
We have been studying the IS-LM model in class, and while I understand how to derive these curves, I am struggling to understand what the model really represents. I am aware that the model implies an ...
- 11
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The cantillon Effect asumes that money is not nutral right?
I am a austrian high school student and as a part of our final exams we have to write a small scintific paper. I decided to write about the Cantillon Effect and its implications and realised that ...
- 1
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2
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63
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Is the neutral interest rate a constant?
Former Fed chair Ben Bernanke explains in his textbook, that the reason the Fed adjusts its target interest rate is because there are IS shocks that change the equilibrium interest rate or the ...
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Academic literature on effects of the digital divide on innovation
I work in research on both the digital divide and on the economics of innovation. Could someone please recommend some academic literature of the effects of the former on the latter?
To give you an ...
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Why do we have money growth in the medium to long run?
Over the long run, why do we have money growth and inflation? There's two explanations I had in mind, wanted to know which one, if either, is correct
If we have expected inflation at 2%, then next ...
- 57
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21
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Do profits actually decrease during booms?
When output exceeds potential output, and the economy isn't in general equilibrium, the mechanism described that brings markets into equilibrium has to do with the fact that firms are not at a profit ...
- 57
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1
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35
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Is the fed purposely creating inflation?
In terms of the Philips curve, the difference between actual and expected inflation is proportional to the cyclical unemployment, or this can equivalently be written in terms of the output gap between ...
- 57
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29
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Is the economy usually in general equilibrium, and what does that mean for targeting FE output?
The policy of targeting interest rates is described in terms of restoring general equilibrium in the goods, labor and asset markets i.e to bring the IS, FE, LM curves to an intersection my textbook.
...
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Interpreting different versions of the aggregate demand and supply model
In Ben Bernanke's Macroeconomics, he explains the two major approaches to business cycle analysis in terms of the IS-LM & AD-AS model.
The Keynesian SRAS curve can be represented as a flat line — ...
- 57
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answers
29
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Economic trade-offs of rooftop solar
It’s a well known problem that rooftop solar drives up electricity prices for non-rooftop solar consumers. This has resulted in some advocates favoring utility scale solar.
Just today the Washington ...
- 131
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1
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162
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Is this given hypothetical two sector economy viable?
First of all, let me clarify that I am very new to economics and have just started studying the subject (both micro and macro). So please bear with me if you feel that the question is naive or stupid.
...
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Why does the price level matter if the real money supply is equivalent
In Ben Bernanke's Macroeconomics, in discussing approaches to dealing with recessions, he mentions three broad approaches:
Government does nothing: The price level eventually decreases, until ...
- 57
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24
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How is interest taken into account when calculating personal income?
personal income = national income - social insurance contributions + transfers - corporate profits + dividends - net interest + personal interest income
I don't quite understand the movement of ...
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1
answer
41
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How does GDP change when a company buys a jet
I'm taking a Macroeconomy course this semester - we have only covered the mere basics and I'm struggling to grasp how GDP changes when an individual/ a company buys something. I'll state three similar ...
- 103
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1
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44
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Why do firms increase production to match aggregate demand if that lowers profits?
In Ben Bernanke's Macroeconomics, he says that according to the Keynesian view, in the short run, firms are (at least temporarily) willing to increase or decrease production to meet aggregate demand, ...
- 57
2
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1
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67
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What is the "Arrow's generalized impossibility theorem" noted by Robert Wilson?
I recently read a note on "Arrow's generalized impossibility theorem", claiming that we don't need the pareto principle.
https://www.sciencedirect.com/science/article/pii/0022053172900518
I ...
- 2,084
2
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1
answer
78
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General question about aggregation of identical households as a representative one
When I was taking a first-year Macroeconomics class, the Professor always mentioned that "The economy has identical households with a measure of 1". I don't really how to aggregate all the ...
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The excess burden of a tax quadruples when the tax rate doubles explain this statement using a diagram
The excess burden of a tax quadruples when the tax rate doubles.” Explain this statement using a diagram. What is the significance of this result for tax analysis?
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Why are marginal wages used when solving for the natural rate of unemployment?
In blanchard's macroeconomics, in analysing the labor market and solving for the natural rate of unemployment, he explains a model where the real wage workers are willing to accept, W/P = F(u,z), ...
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1
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19
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IRF of consumption to negative productivity shock
Should the IRF of consumption to negative productivity shock be negative or positive? I would think negative but I am little bit confused because IRF is a set of partial derivatives correct? Then, if $...
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62
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On a non-standard application of Kalman filter
These questions arose when I was reading Online Appendix D for the paper Missing Events in Event Studies: Identifying the Effects of Partially-Measured News Surprises by R.S. Gurkaynak, B. Kisacikoglu ...
- 121
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51
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Becker-Barro Model (1988, QJE)
I'm struggling in getting the first-order necessary condition in the Barro-Becker model.
Consider the following setting:
Suppose that each person
has two periods of life: childhood and adulthood.
We ...
- 430
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17
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Question regarding impulse response functions (IRFs)
My understanding is, IRF of output ($Y$) to monetary shock ($\epsilon$) is a set of partial derivatives, i.e., IRF of output ($Y$) to monetary shock ($\epsilon$) is {$\partial Y_{t+j}/ \partial \...
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1
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39
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Are strikes mostly redistribution of purcahsing power?
My pet model:
All strikes ask for more money, in one way or another, usually just higher wages.
I suppose people who strike tend to have had the worst relative growth of purchasing power. I imagine ...
user49571
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What is the reason behind the growing Secured Overnight Financing Volume?
I was looking at the NY FED's page (https://www.newyorkfed.org/markets/reference-rates/sofr) and saw the following chart:
Question: Is there a straightforward explanation as to what drives the ...
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30
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Question on the effect of oil price on inflation through exchange rate effect
In oil-exporting countries, oil price increases lead to decrease in inflation through the effect of exchange rate appreciation.
Please theoretically explain the underlying reason for this issue.
For ...
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297
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GDP calculation with production and sales in different time periods
This is question from MACROECONOMICS N. GREGORY MANKIW. Correct answer is D.
...
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Work Vouchers, Mutual Credit: What's prefered, how could they mix?
In mutualism/marxism where maximising equity by preventing accumulation is the goal, what's the current prefered system? I can imagine a labor voucher being exchanged for credit in a person's mutual ...
user50291
2
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0
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31
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Risk aversion and IES in EZ preference
I have recently been replicating Gourio, F. (2012). "Disaster Risk and Business Cycles." American Economic Review, 102, 2734–2766. https://doi.org/10.1257/aer.102.6.2734.
However, I ...
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2
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What data points to use from FRED to create a basic IS-LM model?
I am studying IS-LM model in macro-economics. I am curious which data points to use to create an IS-LM curve.
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Convergence between GDP(PPP) and GDP (Market exchange)
Economic theory predicts that as countries grow, their currency should appreciate. In other words, their GDP at market exchange rates should converge with cost-of-living-adjusted GDP (PPP). To measure ...
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Engineering student doing an eco/fin project on ESG. Need additional resources
I am trying to get a fin/eco project and my prof has asked me to read a paper on ESG titled, "ESG performance and business risk—Empirical evidence from China's listed companies." I am ...
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About the growth rate of the balanced growth path
I found the following excersise with solution but without explanation. Hence I don't understand it.
Let $Y=BK^0E^{0.2}L^{0.8}$ be the production function. The growth rate of B is given by $g=0.2$
, of ...
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1
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96
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Take intermed or advanced series for phd application
I am an undergrad majoring in Math and want to apply for a PhD in Economics (maybe in theory and Econometrics). I have taken the intro series (intro micro and macro) already. Since I am about to ...
- 11
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1
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55
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What results in the money supply permanently increasing over the long term?
So, from what I understand, some ways in which the central bank increases the money supply is through
Open market operations/buying government bonds: But eventually the bonds mature, and the money is ...
- 11
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1
answer
56
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Is there a digital MONIAC machine?
Is there an app/site that reproduces Philipp's MONIAC hydraulic machine and lets users experiment and learn (perhaps better that through simple video-watching)?
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1
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Expected welfare log-normal
I am reading a paper that assumes that individuals just consume their income and that welfare is $y^{1-\gamma} / 1-\gamma$, and they focus on the case where $\gamma>1$. If income is log-normally ...
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