All Questions
Tagged with macroeconomics open-economy-macro
59 questions
0
votes
0
answers
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
2
votes
1
answer
263
views
why does consumption not have a positive multiplier?
My tutor said that only $I$, $G$, $X-M$ in AD can include a multiplier and that consumption does not create a multiplier effect. I understand that these factors affect my ability to consume and that ...
- 21
0
votes
1
answer
702
views
Increasing Returns to Scale and Perfect Competition
Increasing returns to scale due to internal economies are incompatible with perfect competition BUT increasing returns to scale due to external economies are compatible with perfect competition
SOURCE:...
- 41
3
votes
0
answers
96
views
Open Economy IS-LM with Perfect Capital Immobility
As a part of self-study for entrance exams I was trying to solve the following problem:
The problem with this question is that I feel like the equation for $TB$ is incorrect, because we are given ...
- 667
1
vote
0
answers
25
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The case where the entire amount of investment goods are supplied by the imports
A positive investment multiplier does not exist in an open economy simple Keynesian
model when the entire amount of investment goods is supplied from import. Examine
the validity of this statement.
My ...
1
vote
1
answer
127
views
Small Open Economy (SOE) Vs. Emerging Market Economy (EME)
In the graduate-level macro, I often see a Small Open Economy (SOE) setting, e.g., in the textbook of Gali. Yet when I read papers, authors sometimes use the term Emerging Market Economy (EME).
I ...
- 153
1
vote
0
answers
42
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Can anyone explain why the Swiss balance of payments is not balanced (real data)?
While doing a little research I went to the Swiss National Bank's website and downloaded their data on the Swiss balance of payments.
The data is here:
https://data.snb.ch/en/topics/aube#!/cube/...
- 405
2
votes
1
answer
34
views
Financial manipulation and Inflation as tools for sovereign debt default
In the book This Time Is Different, by Reinhart and Rogoff, in chapter 8, the authors state that
Higher minimum level of reserves (?)
And/or upper bound/ceiling to interest rates ( will help increase ...
- 5,121
0
votes
1
answer
44
views
Is there a way to trade currencies several times and end up with more money than one starts with?
Conjecture: The foreign price value of a currency is not absolute.
Scenario:
If the euro appreciates relative to the British pound and the price of the US dollar stays the same relative to the euro, ...
- 3
1
vote
0
answers
320
views
What is the no ponzi condition for this representative consumer problem? Tags: Initial condition, no-ponzi game
This question is following Farhi et.al. 2014's consumer budget constraint modified to add a government bond and removing money. A simplified version is given below which is pertinent to the question.
$...
- 166
0
votes
1
answer
41
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Dynamics of interest rates, exchange rates and bond prices within the UIP
There are already a few questions about the workings of the UIP and the exchange rate. What I have basically taken from those discussions is that one always has to distinguish between the spot rate ...
- 25
2
votes
1
answer
407
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Macroeconomic model of the open economy - NCO and loanable funds
Can anyone explain to me why a capital flight from a country increases the demand for loanable funds in that country. Here's the standard explanation.
https://policonomics.com/lp-open-economy-loanable-...
- 405
1
vote
1
answer
373
views
Connection between saving and investments-Y=C+I+G+NX [duplicate]
I understand
Y-G-C = I+NX = Savings . The equation that we see everywhere in economic textbooks. I see the mathematical logic.
BUT
Given that I = capital investment in GDP accounting surely Savings ...
- 405
2
votes
0
answers
266
views
Difference between IS-LM-UIP and IS-LM-BP models?
My query is regarding the Mundell-Fleming model. I am reading the chapters on open-economy macroeconomics from Blanchard (I am following Blanchard mainly and I have read all the previous chapters). In ...
- 203
1
vote
1
answer
92
views
Why do some researchers include oil price in a VAR model?
Why do some researchers include international oil prices in a VAR model for small open economies? My intuition is that international oil prices cannot be a endogenous variable in the context of a ...
- 659
2
votes
1
answer
174
views
What are some examples of goods that entrepreneurship-intense?
Entrepreneurship is considered to be one of factors of production (the other factors of production are capital, labor and land).
According to Heckscher–Ohlin model, a country that has an abundant ...
- 1,135
0
votes
0
answers
2k
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How to interpret correctly the uncovered interest rate parity condition
So, according to my macroeconomics professor's notes, the UNCOVERED INTEREST RATE PARITY CONDITION is defined this way :
Now, i don't quite grasp the concept of the 'expected appreciation rate of ...
- 117
0
votes
0
answers
119
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How to define world interest rate using IS-LM-BP diagram?
Can you suggest where is the world interest rate in the economy which has a positive current account and a financial account surplus, fixed exchange rate and relative capital immobility? The graph of ...
- 101
1
vote
1
answer
130
views
Positive productivity shock with a fall in output
I am modeling a two-country world. Within each country there exists a representative infinitely-lived agent, a representative final good producer, a continuum of domestic monopolistic competitive ...
- 343
3
votes
0
answers
81
views
Elasticity of substitution in leisure
This might be a very basic question, but I am a beginner in macro models. I would appreciate help with my doubt.
In different papers I have read about the elasticity of labor supply or the inverse of ...
- 343
2
votes
0
answers
58
views
Log-linear version of current account equation
I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
- 343
0
votes
1
answer
128
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Log-linearization of real exchange rate
I have a doubt on how to log linearize an expression for the real exchange rate. I have read in several papers that they express it using substitutions. I haven't been able to find out what ...
- 343
0
votes
1
answer
493
views
Log-linear version of the uncovered interest rate parity
I am trying to derive the log-linear version of the uncovered interest rate parity under complete asset markets.
I know that the UIP condition is given by
$$(1+i_t)=(1+i^*_t)\frac{S_{t+1}}{S_t}$$
I ...
- 343
2
votes
0
answers
324
views
Transversality Condition
I am reading the first section of chapter 10 of the Obstfeld and Rogoff textbook Foundations of International Economics and I have a doubt in how the transversality condition is obtained. Even though ...
- 343
1
vote
0
answers
44
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Non-traded goods in Two Country New Keynesian Model
I am working on a two-country New Keynesian model, where I include traded and non-traded goods. The final good is produced using traded and non-traded inputs:
$$
Z_t=\bigg[a^\frac{1}{\kappa}Z_{T,t}^{\...
- 343
0
votes
2
answers
2k
views
What does it mean if a country's exchange rate is said to be “overvalued”?
For instance, China's or Switzerland's currencies are often said to be overvalued.
- 583
1
vote
1
answer
171
views
When to use a lagrange multiplier?
I have a question in regards to the use of Lagrange multipliers in macro models.
I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
- 343
2
votes
0
answers
164
views
When does the interest rate parity curve shift?
Given the IS LM IRP model,
can somebody tell me the difference for when there is a movement along the IRP curve and when there is an actual shift in the IRP curve?
0
votes
1
answer
33
views
How does exchange rate change with respect to interests?
If the central bank raises intereat rates, isn't the money supply now less and the exchange rate is greater? I have run into opposite statements and dont know how to approach this problem.
Thanks in ...
- 1
0
votes
1
answer
39
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Which one of these intepretations of belonging of a factor of production is correct in context of calculating "income of our citizens abroad"?
NFFI can be calculated as income of foreigners here MINUS income of our citizens/corporations abroad. As far as I understand, it's assumed that our citizens earn income by using OUR factors of ...
- 1,135
4
votes
1
answer
3k
views
Bretton Woods vs Gold Standard
I've been reading about the history of the IMF recently, and it strikes me as odd that despite the problems that arose with the gold standard (Germany in the 1920s, Fed cutting money supply during the ...
- 352
0
votes
2
answers
243
views
Gali (2015) Chapter 8 Symmetric Steady State
In Chapter 8 (small open economy) of Gali's 2015 version of Monetary Policy, Inflation, and the Business Cycle, he often performs log linearisations around a symmetric steady state like below:
My ...
- 25
1
vote
0
answers
63
views
Why a Current Account deficit implies a Financial Account surplus [duplicate]
Every macro textbook out there states that if a country has a Current Account deficit, it must have a surplus in the Financial account, but I have not heard a convincing explanation.
Imagine a ...
3
votes
1
answer
868
views
What is a good proxy for government quality?
Is it ok to use corruption as a proxy for government quality?
- 45
-2
votes
1
answer
262
views
find the equilibrium level of Y [closed]
Assume that the LM curve for a small open economy with a floating exchange rate is given by Y =
200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is
NX = ...
- 225
2
votes
2
answers
181
views
Are Investments positively or negatively correlated with interest rate
Having just begun self-studying economics, I apologise if this question is too simple.
Do investments increase or decrease with increased interest rate?
According to the small, closed economy model (...
- 317
3
votes
1
answer
25
views
Why FDI stock in the same year is different in the same reports?
From World Investment Report 2003, in 2000, the US has 12.4% GDP as FDI inward stock and 13.2% GDP as FDI outward stock. These numbers are equivalent to 1274720 million USD, and 1356960 million USD. ...
- 131
1
vote
1
answer
48
views
Terms definition in Balance of Payment
I have problems in distinguishing among terms in the Balance of Payment / the international balance sheet of a nation.
As far as I know, on Assets and Liabilities sides of BPM, there are Portfolio ...
- 131
5
votes
1
answer
150
views
Teaching: from Microeconomics to Open-economy macro
I am a new faculty teaching MBA courses. Presently, I am teaching International Financial Management (IFM) and Macroeconomics. I have prepared the syllabus of macroeconomics based on first 9 chapters ...
- 123
1
vote
2
answers
84
views
Market crash causes
Does market crash like in 1930 and 2009 are always due to excessive and careless lending activity? Lets say all lending is done in careful manner and no corporate fraud is done somehow, would it be ...
- 113
0
votes
1
answer
836
views
Net Positions vs Gross Positions as they Relate to the Current Account
What is the difference between say, gross asset and liability positions and net asset and liability positions? I mean these terms in the particular way that Cavallo and Tille use them in their 2006 ...
- 3
1
vote
2
answers
167
views
Why did the hybrid Phillips Curve become flatter (as empirical data shows) after the crisis?
The Phillips Curve equation is:
$$\pi_t=\pi_t^e + \beta_1 (\beta_2 Y_t + (1-\beta_2) Z_t) + \varepsilon_t^\pi$$
where $\pi_t$ is the inflation, $\pi_t^e$ is the expected inflation, $Y_t$ is the output ...
- 1,044
4
votes
1
answer
101
views
How can I calculate with the average of the consumption in an RBC framework?
In the following open-economy RBC model consumption level ($C_t$) is not the most important for the representative households, but the difference of the consumption level and the earlier level of the ...
- 1,044
1
vote
0
answers
16
views
What's the ECB share of euro area gov debt?
Where can I see an evolution of the ECB's share in the market for Euro area governmental debt?
I would like to know if there's something similar happening in Euro area as is happening with Fed's ...
- 5,121
3
votes
1
answer
413
views
Why the difference in productivity and wage trend in the UK economy?
In reading this article from FT, we come across two graphs:
and
Shouldn't real wages have a similar trend to productivity? Why was there that discrepancy since the 2009 until 2014? Maybe some other ...
- 5,121
0
votes
1
answer
91
views
Germany's current account surpluses: Negative effect? How to solve them?
The case for a pernicious persistent current account deficit is easy to build: the home country is borrowing abroad for a long period and that debt may reach a point of becoming unsustainable. There ...
- 5,121
2
votes
0
answers
244
views
Macro Economic Factors that Effect the Revenue for General Mills [closed]
I was having a conversation with a friend about politics, and that eventually led to economics. I know... We're a little on the wild side. He made a comment that he thinks that a company like General ...
- 21
1
vote
1
answer
37
views
In a trade imbalance does the importing country's currency become more valuable?
Suppose that country A buys freely from country B, but B uses steep tarriffs to block its citizens from buying from A. In that case country A's currency will pile up in B.
Other things being equal, ...
- 1,728
2
votes
0
answers
268
views
Exchange rate overshooting
Let's consider a Mundell-Fleming model for the short-run, with flexible exchange rates. Now, if we have a monetary contraction (or expansion), the exchange rate path will differ whether we're in the ...
- 5,121
0
votes
1
answer
11k
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GNP, GDP, GNI, GNDI and their relationships?
GDP - Gross Domestic Product
GNP - Gross National Product
GNI - Gross National Income
GNDI - Gross National Disposable Income
We know that GNI=GNP, and that GNP=GDP+Net income from factor ...
- 5,121