All Questions
Tagged with macro or macroeconomics
3,003 questions
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Where is the central bank in the circular flow of income?
In the five-sector breakdown of the circular flow of income (below), we account for leakages and injections from the financial, government and overseas sectors. My understanding is that the government ...
user43089
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1
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Is there a diagram outlining the life of a dollar?
I would like to understand the economic system concretely. My reading leads quickly into graphs and theory, which is interesting but not what I'm looking for. Instead, I imagine I should be able to ...
user43089
3
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1
answer
58
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$H$ is a constant? Maximizing: $\int _0^Te^{-t}f(x,u)dt$ st $x_t=g(t,x,u)$ and $g$ is independent of $t$
$\max_{x(t),u(t)}\int _0^Te^{-t}f(x(t),u(t))dt$,
st derivative $x_t=g(t,x(t),u(t))$. Prove that $H$ is constant.
My try2:
consider the Hamiltonian
$$
H(x(t), u(t)) = e^{-t}f(x(t), u(t)) + \lambda(t) g(...
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what are the root causes that lead to the 2008 economic recession?
looking at factors that were the roots of the recession in the late 2000s, mortgage-backed securities was one. Can the community reinvestment act be counted as another? Are there any other factors ...
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Process of Printing Bills
I have 3 questions:
Who emits the order to the bureau of engraving and printing for printing the bills? Is it the Federal Open Market Committee or the Federal Open Market Committee established a ...
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1
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65
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is Waste picker value added count in GDP?
Is the value added by waste pickers included in GDP calculations? For example, if an old washing machine that has been discarded by an individual is sold by waste pickers, does the entire sale price ...
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What is the difference in economy between country that uses national currency only and country that uses not only national currency?
What is the difference in economy between country that uses national currency only and country that uses not only national currency (for example, national currency + dollar)?
Thanks.
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2
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520
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Is the GDP artificially increased by repeatedly buying and selling the same product?
One way to calculate the GPD (Gross Domestic Product) of a country is essentially adding up all spending by the country in a year (individuals, governament and companies).
Let us know consider this ...
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2
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1
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84
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what to learn to write a comprehensive strong paper?
to write an excellent comprehensive paper, what topics and techniques must an economist learn? One of my former professors wrote a paper I read, there are theories, calculations, and empirical tests. ...
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97
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Economic models that are useful to understand macroeconomics
I started to study economics. Since I majored in Mathematics, I'd like to learn the principles of macroeconomics through the analysis of a simple economic models (using equations). That's why I ...
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176
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Relationship between bonds and interest rates
I read the following sentences from the book about the bond and interest rate.
First explanation goes like this:
When bond traders talk about yield they are usually referring to the YTM [Yield to ...
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0
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Why do shareholders allow CEOs and other executives to have extraordinarily high salaries compared to regular managers and non-managerial employees?
The wage gap between CEOs and employees varies from country to country. A 2021 article from CNBC discussed how CEOs in the US on average earned 351 times more than the average US employee. The ...
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1
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43
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A question about real value of assets of firm when price level decreases
I am a beginner at economics and am reading Mishkin's famous book The Economics of Money, Banking and Financial Markets(eleventh edition). In chapter 12, Page 271, when the author analyzed the causes ...
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36
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Competitive equilibrium: how to define histories on continuous space?
In the usual setup for the competitive equilibrium we have the agent solve:
$$ \max_{\{c_i(h^t)\}} \sum_{t=0}^\infty \sum_{h^t} \beta ^t u(c(h^t)) \pi(h^t) $$
subject to constraints, where $h^t$ ...
- 259
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2
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288
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The Solow growth model
I wonder why at the beginning $sf(k(t))$ is steeper than $\delta k(t)$, but at some point, it starts to become flatter than $\delta k(t)$?
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54
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Solow Model in disrectly and continuously
what is the differences between solow model in disrectly time and continuously time?
Why in disrectly time function use the equation: k(t+1)=(1-δ)k(t) + sf(k(t)) and in continuously time function use: ...
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2
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474
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CRS assumption in Solow model
Can you explain why does Solow growth model assume "constant returns to scale"?
- 131
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2
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105
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Why not just tax monopolies instead of implementing antitrust policy?
Say that we had monopolies that had scale economies. Instead of preventing them from forming via antitrust policy, why do we not just tax those monopolies and return those taxes as benefits to society,...
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During the Covid Pandemic why did the EURO appreciate against the USD even though during recessions the USD is supposed to rise as a safe-haven?
During recessions everyone flocks to USD as a safe-haven currency. However, during the pandemic quite the opposite happened in terms of EUR/USD and the Euro appreciated against the USD all the way ...
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2
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54
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Instead of quantitative easing why wouldn’t Stimulus at Checkout (SAC) work?
Instead of quantitative easing and interest rate reductions why wouldn’t Stimulus at Checkout (SAC) work?
What is SAC? When the Fed needs to stimulate the economy, using Point of Sale technology, SAC ...
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170
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Does the American Dream have any economic meaning?
If you watch enough American TV, you inevitably see something like this: A comedian who originally came from another country (let's say India, although it could be almost any country) is being ...
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2
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33
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Specific term for disincentivized "doing something first"
Of course we can use "moral hazard" but we can use "moral hazard" for many things. Tragedy of the commons is a moral hazard (maximize your utility before the rest of the public ...
- 1,101
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118
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Why does the Rocket Internet purposefully abandon the market of China?
I am studying a very interesting entrepreneurial case: Rocket Internet, and one thing that confuses me is that they do business outside the U.S.A. and China.
“We identify and build proven Internet ...
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1
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187
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What is a European Bond and how is its Yield Calculated?
I've become a bit confused at the concept of a European(or Eurozone) Bond. I can't seem to understand if this is just a weighted average of all the EuroZone countries government bond yields or if this ...
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1
answer
54
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Log of 0 Probelm in Acemoglu et al. 2002b
in Acemoglu et. al. 2002b, which is about European Growth and Atlantic Trade, they do a log transformation of the atlantic trade variable. Since there are many observations where trade is 0, they say ...
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0
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22
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Did countries ever default against Federal Reserve's swap line?
Did foreign countries ever default against Fed's swap line or Foreign and International Monetary Authorities ? Or is it technically possible? I guess they will lose their collateral, and it's a big ...
- 163
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0
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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{...
2
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1
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153
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Frameworks and models in economics
A framework is not a model of a specific system,
but a way of formulating and studying a
variety of systems. Classical mechanics,
quantum mechanics and statistical mechanics are all really frameworks. ...
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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 ...
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0
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38
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Why was the USD rangebound between 1987 and 1995 from an economic standpoint?
I'm trying to understand what caused this long period of range boundedness for the USD index from 1987-1995 from an economic standpoint.
From my understanding. In 1985 the USD had reached it's ...
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4
answers
154
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How can good outcomes, and not just trade-offs, be achieved through economic policy?
I realise this is a very broad question, and my economic knowledge amounts to 1 year of high school, but it seems as though every economic policy causes trade-offs, and none actually solve issues. As ...
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2
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118
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Why isn't Net Worth Change of a country used to calculate its economic power, as opposed to GDP?
As I understand, GDP is the sum of market values of final goods and services produced in a country in a year.
Let me define Net Wealth Change or NWC as the difference between a country’s net worth at ...
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Why are final services sold internally (to residents) accounted for in a country’s GDP?
My understanding is that many pure services result in no direct creation of global wealth, but only in a transfer of wealth.
Here I mean wealth in an economics sense as the sum of goods and ...
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1
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494
views
How did interest rates work under the gold standard?
Say under the gold standard \$1=1 gold unit. And the interest rate is 10%. Does this mean if I deposit 1 dollar at the bank at the end I would end up with $1.1 which means in essence I would actually ...
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1
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69
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Could Foreign Exchange rates fluctuate under a Gold Standard system?
I recently read an article where it said that during the gold standard, right before world war 1, 1 GBP went from equaling \$4.87 to soaring up to \$6.75 . My understanding always was that Forex rates ...
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1
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77
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Hansen's Basic Model (RBC)
In Hansen's RBC Model, random technology variable follows the process
λ_(t+1)=γλ_t+ε_(t+1)
How do the assumptions of shocks ε_(t) being positive and bounded above with mean of 1-γ imply that the mean ...
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2
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76
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What does a Denovo bank balance sheet look like on Day 1?
New banks require capital of $32M before starting operations. On Day 1, what does it's balance sheet look like? Before the bank makes a loan, it needs reserves to settle the transaction. Are those ...
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2
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0
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42
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How is natural interest rate estimated?
I'm working on a project in which I need to describe, compare and contrast various models of natural interest rate.
My team is planning to discuss the Laubach-Williams model, DSGE model, Structural ...
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1
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114
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Solow-Swan Model - Diagram and Equation
In the Solow-Swan Model, why is the (n+δ)k curve drawn as a line from the origin? What is the economic intuition underlying the same? Also, what is the economic intuition underlying the fundamental ...
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3
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0
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57
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some derivation in Alvarez and Jermann (2000)
(Alvarez and Jermann (2000)) For each $i \in I$ there is a constant $\xi_i$ such that for all $t, z^t$,
$$|u(c_{i,t}(z^t))| \le \xi_i u'(c_{i,t}(z^t)) c_{i,t}(z^t).$$
$\cdots$. This condition holds if ...
- 495
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86
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Why price always increase?
My question is why price of goods and services always increase
Is it a law like (entropy always increases) .
But in electronics price always decrease.
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2
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84
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Find the salary and interest rate in the $AK$ model
I'm trying to solve this exercise for Macroeconomics III (the course covers long-run growth models).
Find the wage $w_t$ and the interest rate $r_t$ in the $AK$ model, i.e., the production function is
...
- 2,351
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1
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96
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What rules apply integrals over a continuum of agents in a symmetric equilibrium?
Suppose I have a model with a continuum of agents denoted by $i \in [0;1]$. In a symmetric equilibrium, i.e. in a equilibrium where $x_i = x_j$ for all $x,i$, would I be able to conclude that: and ...
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1
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1
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84
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Regarding the arbitrariness of states and controls
I am trying to better understand the process of deriving Euler Equations using
the first order condition of the problem on the right hand side of a Bellman equation
and the Benveniste-Scheinkman ...
1
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0
answers
66
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Expected value in budget constraint
I have been reading this paper by Yang Liu, Lukas Schmid and Amir Yaron, which contains a very elegant mechanism that generates an endogenous liquidity premium for US government debt. However, I got ...
2
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1
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298
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Reductionism vs emergentism in economics
Is economics reductionism or emergentism ?Reductionism is the idea that knowledge at a higher level can be deduced from the entities and their interaction at a lower level.Emergentism rejects ...
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226
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Why do we omit the integral when deriving the f.o.c.’s in long-run growth models such as Romer (1990)?
For example when solving Romer’s model (1990) in continuous time, for the firm producing final goods, its production function is:
$ Y(t) = \int_{0}^{M(t)} (A(t) L_Y)^{1-\alpha} {x(i,t)}^{\alpha} di$,
...
- 2,351
2
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1
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118
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Present Value of flow of profits with constant interest rate
I'm studying Schumpeterian Models of Quality Ladders from the Barro's book (Ch.7).
I have problems in getting the derivation of equation $(7.13)$ as follows
The basic idea of those models is: when an ...
- 430
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1
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73
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Can someone help me how to perform quarterly chain linking?
Assume we have given apples and oranges; If we only consider annual chain-linking, it is pretty simple, e.g. let us have the following values:
Year 1
Year 2
Year 3
Year 4
Apples
Amount: 10, Price:3, ...
- 11
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0
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129
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Effect of competition on the slope of NKPC, Calvo vs. Rotemberg
I was just going through some notes on NK models, and I noticed the following.
Under Calvo price setting, the slope of the NKPC is
$$
\kappa_C = \frac{1 - \alpha}{1 - \alpha + \alpha \epsilon} \frac{(...