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Questions tagged [macroeconomics]

Macroeconomics is a branch of economics dealing with the aggregate economy as a whole, rather than individual markets.

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Differentiating through this integral in banking loans?

Working through the math which gives the following profit function for a bank but I can't seem to solve this first order condition. The profit function is defined as follows, \begin{equation} \pi_t = ...
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How can you find the government spending multiplier from a VAR?

I have done a VAR investigation of how a number of macroeconomic aggregates respond to a government spending shock. However, I can't seem to remember something as basic as how to find the government ...
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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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How is labor demand measured?

For instance, in the introduction of this paper (first paragraph), talking about Figure 1, they say that labor demand is measured as the real wage bill normalized by population. Is it common to ...
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Linearisation of the IS curve?

How to the IS curve linearised around the structural equilibrium?, what is the math behind it?
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FOC and Log Linerizations

I was wondering whether anyone might be able to help me or at least push me in the right direction with this New Keynesian Model. I apparently have that the household function is as follows: ...
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How to derive optimal labour supply from utility? [on hold]

I am struggling with this question: An agent's utility is U = log(C) - 2L2 (where log(C) is the natural logarithm). The agent produces their own output with a production function C = Y = AL^α, where ...
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《Free to Choose》 many fields and methods of encouraging freedom and competition in the book ,why they are still rarely implemented today?

《Free to Choose》Book by Milton Friedman and Rose Friedman,has been published for almost 40 years. many fields and methods of encouraging freedom and competition in the book ,why they are still rarely ...
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National income referred as GDP?

National Income is the total value of all services and goods that are produced within a country and the income that comes from abroad for a particular period, normally one year. Gross Domestic ...
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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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Why bonds held by foreign investors is greater than total bond issued?

Total bond issued is reported by BIS debt securities data. Let BIS denote this amount. Bonds held by foreign investors is reported by Balance of payment statistics (IMF). It is the portfolio debt ...
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Energy in production

Economists use labour and capital as the primary factors of production in income approach to output calcluation. Both labour and capital are reproducible factors. I can compute labour and capital cost ...
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Elasticity of substitution between leisure in two periods

This is a basic question, but I am new to macro models. The question is from Romer's text. Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
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Bellman and Lagrange equation used at the same time

I just encounter a strange maximization problem in Sargent's Recursive Macroeconomic Theory book, when they have Bellman equation and Lagrange equation at the same time. Specifically: $P(v) = \max_{...
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is there a way in NIPA accounts to see a measure of size/change in private debt stock?

is there a way in NIPA accounts to see a measure of size/change in private debt stock , and how is it measured? if not then how is it measured?
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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 ...
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where can i find monthly industrial production time series for china?

I'm looking for monthly Industrial production index for China. I can't find it anywhere. does anybody have a solution for this problem? It seems that IFS, world bank and china's statistics do not ...
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Chap 20 Sargent book (Limited Commitment model)

I am reading Chapter 20 (Insurance vs Incentive) in Sargent's Recursive Macroeconomics Theory. I don't understand this part on his book (on page 809, 3rd version). Why we know that the optimal ...
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what are Investments (as defined in macroeconomics) that Households make?

i guess a) NEW house b) buying shares in a domestic company in an IPO c) investment in a personal business , eg taxi driver buying a NEW taxi, shop owner buying his shop or renovating it what about ...
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exchange rate calculation

Suppose you have one U.S. dollar with which you wish to purchase U.K. (one-year) bonds in period t. Which of the following expressions represents the amount of U.K. pounds you will receive in one year ...
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Probability of history occurring at time $t$

I am reading LS book "Recursive Macroeconomics Theory". In this book, as well as in some online lecture notes on the Internet. They often denote, for example, $\pi_t(s^t)$ for probability that ...
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1answer
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Central bank loss function

$$ L_t = \gamma(\pi_t - \pi_t^\otimes)^2 + \hat{Y}_t^2 $$ Central banks loss function is given by the equation above. This loss is increasing and convex in the distance from the inflation target, i.e....
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What does it mean when a discount lender “rediscount[s] reserves”?

I was reading a wikipedia article about the evolution of global financial system: https://en.wikipedia.org/wiki/Global_financial_system#Interwar_period:_1915%E2%80%931944. In the passage about the ...
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Statistical distribution of wages and wealth

How are wages distributed globally? Wages do not follow a normal distribution, do they? Is wealth distributed in the same way or differently?
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The reality of the multiplier effect

I was just reading my economics notes when I stumbled upon this paragraph: Singapore has a very open economy and imports most of its inputs and necessities, which means that MPM is likely to be ...
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2answers
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why isnt private sector savings defined as $S=Y-T-C-I$?

why isnt private sector savings defined as $S=Y-T-C-I$ ? afterall, savings is the money you have left over after you net off from your income ALL of what you have paid out. $Y, T , C$ And $I$ are the ...
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Keynesian Cross and Balanced Budget Multiplier

Hi! I am trying to understand the problem above, and was wondering if someone could help me with the last question. I think I am fine with all other questions. Here is my attempt: (i) The fiscal ...
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How does raising interest rates calm inflation?

My understanding is that by raising interest rates, domestic CPI indices are less likely to rise signicantly. However, raising interest rates also attracts capital inflows and can create asset bubbles....
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2answers
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Why did it take so much QE by the ECB to raise the Eurozone inflation to 2%?

From 2015 to 2018 the ECB increased the money supply by around 20% (around 6% y/y), with a GDP increase rate under 1%. Yet the inflation rate remained under 2%. A back-of-the-envelope calculation ...
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Money, Product and Bond Markets in Equilibrium

Why are we assured that when the money and product markets are in equilibrium, the bond market will also be in equilibrium?
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What happens if there is increased government deficit spending but not increased money supply?

What happens to real GDP if the government deficit spending is increased, but the Federal Reserve doesn't expand the money supply? Would the effect on real GDP be the same as if the Federal Reserve ...
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Change in Net Foreign Assets

I am currently reading about Capital Flows and the theory states that net foreign assets are domestic holdings of foreign assets minus foreign holding of domestic assets. An example of cross-border ...
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Fluctuations in the financial and capital account balance

I was just analysing the various accounts of the balance of payments for the economy of Malaysia. It has come to my attention that the income balance and trade balance of the current account are ...
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3answers
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How did the US gain such a large increase in GDP compared to other industrial nations within the last decade?

For example, while Germany’s GDP increased by about thirteen percent, the US’s GDP has increased by more than a third of its GDP in 2009.
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For how long can a country not be in recession, when equities are decreasing in value?

I'm thinking more precisely in the current situation of USA. I don't have the data at hand right now, but the Stock market in the USA has grown in the past decade faster than any other country in the ...
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Medium run , Short run differences in IS LM PC

I was wondering if someone could tell me the main differences between the Medium and Short run of the IS LM PC model? What are the main characteristic differences in term of inflation between the two?...
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Output gap and potential growth that are less subject to revisions

Output gap and potential output are important concepts in the economic literature. However, most estimates of these quantities are subject to heavy revisions as new data becomes available. For example,...
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Expected exchange rate and interest rate

If say the markets expect the home country's currency to appreciate, how will that affect equilibrium output and interest rate? What I think: If they expect home country's currency to appreciate, ...
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Is the mode of wage distribution a meaningful economic indicator?

The Central Statistical Office of Poland publishes a report every two years, in which it diagnoses the labor market. Among other indicators, they publish the mode of the distribution of wages, in ...
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What does the economic collapse of a country mean and what are its consequences?

I live in Iran, a country which has always been under sanctions since 1979. After the US sanctions on Iranian oil, everything got worse and the price of everything increased four times in just three ...
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3answers
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Logically inconsistent optimality condition

I'm reading a book on monetary policy, and it defines the representative household's consumption as $$C_t = \int_0^1 C_t(i) di$$ so, basically a sum over the consumption of good $i$. Then later on, ...
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Has Facebook considered a system of micro payments to pay users for the work they do in improving their Facebook?

Facebook, notoriously, crowd-sources through the internet to improve their product - Facebook. This without any payment. Given the vast computing power that is now available and the kind of personal ...
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1answer
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Bond prices and Trade deficit

Why does the narrowing of trade deficit cause an increase in bond prices? I do understand that narrowing of trade deficit leads to narrowing of capital account surplus. Also, investor confidence ...
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What is the financial contribution to the USA economy by illegal immigration - decade by decade - since slavery was abolished?

The following question was closed down by the 'community' policing 'algorithm' after two down-votes, so I'm asking it again with a bit more detail: After the end of slavery in the USA - paid for by ...
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1answer
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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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1answer
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Isn't it the case that figures on employment should equal the sum of employees plus the self-employed?

This is a question about data consistency. I'm using the AMECO database and I'm interested in employment data for Greece. My current understanding is that the series about Employment (NETD) should ...
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Where does the Gini Coefficient Spreadsheet Computation on Wikipedia come from?

on Wikipedia there is a page called income inequality metrics and there is a table that explains how to compute a few, for example the well-known Gini Coefficient. Please find this approach under this ...
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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
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S=I in a closed economy

In a closed economy, the national income identities imply that $$S=I$$ However, the intuition is not clear to me. The saving is the part of national disposable income that is not consumed. $I$ is the ...
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Endogenous technology

Given the following endogenous knowledge (technology) model where production function is as follows - Can anyone tell me - For what values of φ does this model get closer to a Solow model of growth? ...