All Questions
Tagged with macroeconomics finance
60 questions
0
votes
2
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56
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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?
0
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0
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21
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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 ...
- 70
0
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0
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34
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What's a good textbook reference for interest rate models / term structure modelling?
There is a huge literature modelling the yield curve. For instance, the affine term structure literature, both in continuous and in discrete time, has many models with different factors, models that ...
1
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0
answers
44
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Flow budget constraint in a paper by Garleanu and Panageas
I am reading this paper and got confused by Equation (6) in said paper. Suppose there is an investor that can trade in riskless bonds that pay interest rate $r_t$, and holds a market portfolio with ...
1
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0
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55
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Background courses for MSc in Finance
I'm a Mathematics bachelor student and next year I am going to pursue a 2-year MSc in Finance.
In this question, as a total beginner in Finance and more generally in Economics, I'd like to get ...
- 111
1
vote
2
answers
151
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How to derive Fisher's equation?
Guys help me derive Fisher's equation or suggest references that have the derivation.
I am looking for this relation: (1+i)=(1+r)(1+π)
- 41
0
votes
1
answer
121
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Logic behind uncovered interest rate parity?
So I am having trouble understanding the UIP equilibrium condition.
Namely, according to UIP, when the home country has a higher interest rate than the foreign country, its currency will depreciate ...
- 1
5
votes
5
answers
461
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Macro papers that an undergrad would be able to replicate
I'm writing my bachelor's thesis this spring, and would like to do it by replicating a modern empirical paper in either macro or finance. I've tried to find a paper by skimming through renowned ...
- 51
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0
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47
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Why is eurodollar future so popular
It's well-know that eurodollar futures contracts are the most liquid contracts in the world. Traders use them to express views on interest rates or hedge interest rate risks.
My questions is why are ...
- 163
2
votes
0
answers
59
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Habit formation ala Constantinides (1990)
Consider the following problem, from Constantinides (1990).
\begin{align}
V(W_0, x_0) \equiv \max_{c, \alpha} \mathrm{E}_0 \int_0^\infty e^{-\rho s}\gamma^{-1}[c(s) - x(s)]^\gamma \mathrm{d}s,
\end{...
0
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2
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70
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What would be a truly universal currency?
I have no clue where to ask this, so here it goes... With the advent of LK99 and its potential uses in recent solutions for modified Alcubierre drive fields, it pushes me to wonder: What if humanity ...
- 1
1
vote
2
answers
165
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General Solution Differential Equation
We have the following system of ordinary differential equation. To solve this using diagonlsation we do the following. My concern is that my general solution is a subtly different result, I've checked ...
- 1,011
2
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0
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55
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Complete markets and convenience yields
I have been reading some papers on the safety/liquidity of US government debt and got a bit perplexed by the assumptions made in some of those papers. For example, this paper by Mehrotra and Sergeyev ...
-1
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1
answer
99
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Why are full reserve banks called such, when they still have depositors?
Why do full reserve banks put all their depositors' money in reserve while depositors still have the right to deposit?
Why is it called full reserve banking when people can deposit their money there?
- 21
1
vote
0
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51
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Question about money supply and the nominal interest rate
How does an increase in money supply, due to a decrease in the REPO rate, decrease the nominal interest rate?
If an increase in money supply means more inflation, how doesn't inflation lead to ...
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1
vote
0
answers
37
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High Kurtosis with normal Distribution
I need help. Here is my problem, I am testing normal distribution on covid, 2008 crisis, and beetween these. So I have 3 timezone and 7 indexes. When I use SPSS to test the normal distribution with ...
- 11
1
vote
0
answers
71
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Can the Equity Premium Puzzle apply equally to bonds?
Mehra and Prescott (JME, 1985) use the consumption-based asset price model to express the expected spread of equity returns over, e.g., a risk-free Treasury bond, as
\begin{equation*}
\mathbb{E}...
- 11
0
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2
answers
55
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Understanding Debt Deflation
I read the following explanation for debt deflation in my textbook:
To better understand how this decline in net worth occurs, consider what happens if a firm in 2018 has assets of 100 million (in ...
- 99
1
vote
1
answer
50
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What are good (i.e. non-random walk) time series to perform forecasting on?
I have developed a recurrent neural network (RNN) model for time-series forecasting. I now want to test its performance against more standard statistical/econometric models such as ARIMA or VAR. The ...
- 11
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3
answers
131
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Why do banks need to borrow money (i.e. bond issuance)?
When a bank gives out a loan, a simultaneous liability and asset is created on their balance sheet, and 'external' funding doesn't fit into this picture... so why do they need to borrow money?
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votes
2
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99
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Can an appreciating currency lead to inflation?
If a currency, e.g. the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. India could have net exports, high remittances, increasing ...
- 15
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0
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35
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How to understand: interest income is a moving average of past interest rates
I encounter this question in the paper by DRECHSLER et al. (2021) (Banking on deposit). How to understand that "interest income is close to a moving average of past interest rates, consistent ...
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2
votes
1
answer
98
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How to interpret risk premium
I do not understand the notion risk premium. Let us suppose that John goes to the city by car, but he is thinking about not paying for the parking. If he is caught in the act he must pay the fine. How ...
- 131
0
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1
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73
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why federal fund rate vs treasury bond yield generally move in the same direction?
My own thought is, if the fed lowred federal fund rate, peoole should look for investment with greater return, like treasury bond. More demand=decline in yields but why do they generally move in the ...
- 21
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0
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133
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Policy ineffectiveness proposition
Suppose,
the Aggregate supply is given by the Lucas Supply Curve -
$y_t = ȳ + b(P_t - E_{t-1}P_t) + μ_t$
where $μ_t$ is stochastic supply shock (following standard normal error properties).
Aggregate ...
- 499
31
votes
4
answers
9k
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Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?
I recently read in a news article that a large amount of Libyan banknotes printed in Russia were seized in Malta following an order coming from the USA. Both Russia and the USA have geostrategic ...
- 413
2
votes
1
answer
259
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Nelson-Siegel-Svensson parameters provided by the Bundesbank
I am a college student and I have recently learned about Nelson-Siegel-Svensson method which is used by the German Federal Bank to determine the yield curve. I have to generate yield curves of ...
- 51
-1
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1
answer
62
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What determined the "cost of borrowing money" or the interest rate in a gold-based economy
In the modern economy, the central bank decides the cost of borrowing money using interest rates along with other several tools and technic. But I was wondering, in a gold-based economy (not the gold ...
1
vote
2
answers
244
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Transparent Fractional-reserve banking as an alternative to the current system
I come from a layman perspective, but I've been trying to understand macroeconomics and finance. Currently I'm struggling with the current topic. Here I'm not worried about the system transition just ...
- 21
3
votes
1
answer
135
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Beginner wanting to learn about economics/finance to explore career options?
I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
- 31
2
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1
answer
226
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Why is the cash in circulation on the rise in rich countries?
The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional?
For example, here's ...
- 1,044
4
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1
answer
1k
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What is the difference between conditional and unconditional risk premia?
This is an asset pricing question. What is the difference between conditional and unconditional risk premia? Here's the context:
The fact that carry trade strategies typically earn positive average ...
- 323
1
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1
answer
12
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Which measure of total loans is more relevant to Financial Stability?
I am writing a paper on the financial stability of the banking sector. One factor im looking at is the amount of new loans or credit issued (credit growth). I have two different total loan measures. ...
- 135
2
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0
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45
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Can a government invest in public companies so their dividends can finance the government
Is it possible that a country could use the money in its sovereign wealth fund to invest in different country's Stock Market and use the dividends to finance its government thus increasing spending ...
- 21
0
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2
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92
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Can central bank interest rate hikes lead to a price gain in equities?
I ran an empirical analysis on recent interest rate changes of European central banks on Swiss equity prices and found statistically significant results. A 1 percentage point increase in interest ...
- 135
3
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1
answer
43
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What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?
I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me.
...
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1
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216
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J Curve and DD Schedule in the Short Run (International Finance)
Assume that the J-curve is true. What would the DD curve look like during the early period of the J-curve (where the value effect dominates)? What would the effect of temporary changes in monetary ...
-1
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1
answer
49
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Common sense of economics as reflected in proverbs [closed]
May I ask what other proverbs reflect the common sense of economics, such as those who dig for gold are not better than those who sell shovels?
What I'm talking about is that during the Gold Rush in ...
- 101
1
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2
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156
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What accounts for the high GDP of the United States?
Wikipedia defines GDP as:
Measure of the market value of all final goods and services produced in a period (quarterly or yearly) of time.
So, I take it that the total value of all goods (and ...
- 113
0
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1
answer
93
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Present Value Analysis
For my exmaple, we have machine A with an initial cost of 15K and O&M of 2k per year for the next 4 years. After 4 years, the O&M rise to $2.7k per year. No salvage value and life span of 20 ...
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1
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3
answers
145
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How do economic and financial policies in government deal with cryptocurrencies?
Given the decentralized nature of cryptocurrencies like bitcoin and ethereum, how can centralized organisations like banks and the government create policies around it without changing the way ...
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2
answers
114
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Will money still have any value in the fully automated world?
Moved from the personal finance & money SE:
The following question is somewhat of an existential nature and may not necessarily be related to finance or economics in the strict sense.
Reading ...
user15109
0
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1
answer
32
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Insurance Company's Role after Natural Distaster
Is anything special expected of insurance companies after a natural disaster? Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of ...
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2
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393
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Do stock markets price in existential risk (i.e. global nuclear war)?
Question Moved from Money StackExchange:
https://money.stackexchange.com/questions/74002/do-stock-markets-price-in-existential-risk-i-e-global-nuclear-war
Q: Do stock markets price in existential ...
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162
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How to solve a variation of Merton's optimal portfolio problem?
Does anyone know how to solve the following problem?
I have tried to solve this but I'm lost since I have never dealt with a Stochastic Dynamic Programming problem with many variables.
$max_{c_{t},\...
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1
answer
46
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Renminbi demand and CNY rates
I read something similar to here, http://www.businessinsider.com/onshore-and-offshore-renminbi-2014-2?IR=T, paragraph 6, that demand for renminbi drives down cny bond market?
I can understand how ...
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1
answer
37
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Correct way to measure Defence budget of a country like India [closed]
I read that defence budget of the country is 2-3% of GDP, but isnt GDP irrelevant when we are talking about expenditure? Shouldn't it be in a ratio of military import/total import?
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4
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15k
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What institutions are examples of "shadow banking"?
I often hear the term shadow banking tossed around when discussing the United States and Chinese economies. What exactly is shadow banking and could you give examples of some specific companies that ...
- 530
3
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1
answer
57
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Have there been any structural changes in the market that would lead the indexes to be trading so high?
If you look at this graph of the SnP500:
You will see that it is trading at levels higher than pre 08 or 99. What systemic structural changes in the market have led it to be trading so high? I think ...
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1
answer
473
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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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