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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More equations than endogenous variables in RBC model
I recently came across my late father's bachelor's thesis, in which a RBC model is described. It appears to be a variant of Hansen's 1985 model with indivisible labor. I wrote the model into Dynare to ...
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When to use current US\$ vs. constant 2015 US\$ vs. PPP?
Given that I am interested in comparing various countries by their GDP per capita - which way of calculating this metric should I use? Namely, when to use current US\$, when to use constant 2015 (or ...
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Deriving consumption in UMP
I have a hometask in advanced macroeconomics discipline where I'm working with a utility maximization problem.
The consumer lives in 4 periods, t = 0, 1, 2, 3
His lifetime utility is given by a ...
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time series of reserve requirement ratio of people's bank of china
I am looking for historical data on PBOC reserve requirement ratios with a breakdown by regulated subjects (large and small banks are subject to different ratios) as well as ratios for yuan and Fx ...
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Is there any situations where real exchange rate positively impacts on national imports?
I'm working on a gravity model analysing the factors that affect national imports, and the results showed that the real exchange rate (real exchange rate between local currency and foreign currency) ...
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60 views
Wealth in the utility function
Suppose there is a representative household of unit mass who lives forever. Preferences are given as: $$\sum\beta^tu(c_t,k_{t-1})$$
Technology is given as: $$k_{t+1}=AF(K_t,L_t)+(1-\delta)K_t-c_t$$ ...
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1answer
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How to derive a general relationship between the Ramsey-Keynes rule and the law of motion for capital?
Consider a representative agent model where the representative agent has standard preferences
$\int^{\infty}_te^{-\rho t}ln(c(t))dt$
where $\rho>0$ and $c(t)$ is consumption in period t as usual. ...
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task of the 1st year of the institute [closed]
In the reporting year, the results of the development of the national economy were: GNP -100, depreciation of fixed capital 10, household expenditures for the purchase of consumer goods - 50, ...
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1answer
30 views
Mortgage-Backed Securities
I was reading about MBS's and according to my understanding, suppose the bank gives me person a loan for house. Then, the bank sells the loan to the investor/government through an agency like Freddie ...
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7 views
Brexit impact data and forecasts
I am looking for some new studies (preferable from 2021) about the medium/long term impacts of Brexit, especially accounting for the TCA agreement. I know there are many papers about these topic, but ...
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1answer
55 views
Comparative statics of the Ramsey model, the effect of a change in population growth on the steady state capital-labor ratio
In Acemoglu's book "Introduction to Modern Economic Growth" there is Proposition 8.3 which states that the impact of a change in the population growth rate on the steady state capital-labour ...
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1answer
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Nonseparable utility across states of nature: an intuitive example
I am new to nonseparable utility across states of nature as found in some macro-financial models (discussed in this YouTube video lecture by John Cochrane). I do not find the notion intuitive. Could ...
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59 views
What's the origin of the naming of Euler equation in economics?
In Economics, Euler equation is:
$u'(c_{t})=\beta Ru'(c_{t+1})$
What is the origin of the name of 'Euler' in this equation?
I know that, in fluid dynamics, Euler equation is
\begin{aligned}{D\mathbf {...
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1answer
93 views
+100
How would a perfectly competitive industry respond to a macroeconomic demand shock in the long run?
In microeconomics, we are taught that in a perfectly competitive industry, the long-run industry supply curve is horizontal. This is because new firms would enter or exit until the profit is driven to ...
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Current Account effects in a large economy as opposed to a small economy
I have a question
Imagine the savings desire increased in a large economy, obviously the current account of this country would improve holding all other factors constant, but how would the magnitude ...
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What are good sources for the economics of patents?
I am curious about how the stimuli patents exercise, upon innovation, may be counteracted by their slow down of the dissemination of technology. Reading suggestions will be very much appreciated.
My ...
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7 views
Current Account and FX valuation
I was reading somewhere that under normal circumstances the FX rate of current account surplus countries tends to underperform and that of current account deficit countries to outperform. Can you ...
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Adjusting for inflation (is it possible that real $ exceed nominal terms)
I have adjusted the following data to inflation, and I am confused as my real figures are higher than my nominal terms, but I always assumed that adjusted for inflation figures would be lower (i.e. ...
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1answer
46 views
How to set up the Hamiltonian for this utility maximization problem?
Consider a representative household who accumulates capitals, earns labour and capital incomes, consumes part of its incomes, buys bonds and pays taxes.
The household maximizes its lifetime utility
$$ ...
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1answer
220 views
Are there any general rules that can be used to assess the consequences of a significant minimum wage increase in a country's economy?
Quite recently the EU Parliament discussed upon a new draft EU law that will ensure a minimum level of wage protection in all member states.
The minimum relative to average wages of full-time workers ...
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1answer
33 views
Godley-Lavoie private bank model
Good evening everyone !
I'm currently reading Godley and Lavoie Monetary economics. It's really an awesome book, and I'm at the 7th chapter where they introduce private bank money. The model is very ...
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55 views
Recursive competitive equilibrium with uncertainty [closed]
Consumer's preference: $E_0 =\sum_{t=0}^{\infty}\beta^t u(c_t)$
Markov transition matrix for labor: $\Gamma=\begin{pmatrix}\gamma_{ll}&\gamma_{lh}\\ \gamma_{hl}&\gamma_{hh} \end{pmatrix}$
In ...
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1answer
29 views
Should governments print money while the currency gets stronger
In a given situation where a local currency becomes very strong compared to other major currencies (like the USD, EUR, etc...), should the government / central bank leverage the opportunity to print ...
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1answer
39 views
Why does absolute price inflation depend on interest rate while relative price inflation does not?
This is a follow-up of my previous question: How come there is inflation in a model with no money? I have answered my own question with an example.
To briefly recap the example, consider a closed ...
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Venezuela Hyperinflation in 2014 on an IS LM FX model
In 2014 Venezuela began experiencing some of the worst hyperinflation. I wanted to know how this situation would be represented on a IS LM FX model, and the consequences of the hyperinflation.
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What causes rate transmission to be slow?
A recent quote from David Rosenburg on rate hike expectations reads:
Remember, everything the Fed does in a moment of time has a peak
impact on the economy 12 to 18 months later. Thus, raising rates ...
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0answers
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The influence of an increase in ATM's on the demand for central bank money
This is a question posed in Blanchard's book on Macroeconomics.
The question is simple. Consider an economy with a central bank (CB) and private banks. The demand for CB money is then determined by ...
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2answers
710 views
How come there is inflation in a model with no money?
I'm watching the video lectures of Financial Theory (ECON 251) by John Geanakoplos, Yale University. In Lesson 5, Chapter 4 at 33:41, Geanakoplos defined inflation as the ratio of prices between two ...
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2answers
47 views
Help with a (simple) log-linearisation
As a solution to an economic model, I end up with the following equation:
$$L=\frac{\alpha f^{\epsilon}s\left [ 1-Ak(1-\alpha+\alpha f^{\epsilon}s)^{\frac{1}{\epsilon}} f^{-1} s^\frac {-1}{\epsilon}\...
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1answer
40 views
Which model of capital accumulation do macroeconomists prefer, renting model or investing model?
Consider a closed economy with perfect competition, no government and no fiat money. Consumer goods are aggregated as a single type of goods and prices are measured in units of goods. For such an ...
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1answer
45 views
What is the meaning of lagrange multiplier (especially in ramsey problem)
Consider lagrange function for ramsey problem:
$L=E_0 \sum_{t=0}^{\infty} \beta^t \{u(c,l)+\gamma_t (s^t)[E_0 \sum_{j=0}^{\infty} \beta^j u_c (s^{t+j}) z(s^{t+j}) -u_c (s^t) b_t(s^{t+1})] \}$
where $[...
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2answers
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What is the intuition behind Expected Utility Theorem?
I am referring to the definition in Proposition 6.B.3 on Page 176 of Mas Colell. I follow the formal proof and the application of the Independence axiom at various steps (mathematical application of ...
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Volatility indexes
I want to use a volatility index as a measure of economic policy uncertainty. The index that I want to use is CBOE Volatility Index: VIX, but I don't know if I only can use this for US or if I can use ...
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1answer
33 views
Wages are lower than 30 years ago in Italy, why?
Recently I've seen some statistics about wage growth in the European Union in the last 30 years and surprisingly, Italy is the only country with a negative value.
So, what is the root of this problem? ...
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1answer
55 views
Does real wages have to increase for an economy to function from a mechanical point of view
Ive been trying to figure out why real wages should increase. If one can still buy the same stuff one could 20 years ago, isn't that good enough?
Or does this necessarily imply that one has not taken ...
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2answers
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Would it even be possible for m2 to remain stable under positive interest rates?
Let's say bank A has 1 of assets and 10% reserve requirements. It lends to bank B 9 Then they lend back and forth so they both have 50 of assets and liabilities (or whatever they can).
Then those ...
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1answer
49 views
substitution effect
when ı study about link between leisure time and gdp my lecturer said that when people gdp as rise people want to work hard and he say that it is substitution effect. Also when ı research the ...
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1answer
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Is this really a valid description of AS&AD after lockdown?
I understand that in the short run AS decreased (supply chains) and AD increased (stimulus, post-lockdown behaviour). But what's up with the lines in the long-run?
Also is this even a valid way of ...
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2answers
58 views
Economic ignoramus question: if inflation is not caused by excess money but by supply constraints, why raise interest rates?
if inflation is not caused by excess money but by supply constraints, why raise interest rates? In fact, if higher interest rates suppress investment which would otherwise increase production capacity,...
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23 views
Does Okun's law work?
When we consider the Okun's law do we consider the U3 unemployment rate or the U6 unemployment rate or do we assume both? Assuming that we consider the U3 unemployment rate what are the challenges ...
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1answer
28 views
How would inflation in the U.S. affect dolarized countries
Today I was reading about climbing inflation in the United States, so it got me wondering how would that affect (if at all) an small economy with the U.S dollar as its official currency.
As a bit of ...
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Unemployment forecasting model specification
I am building a model to forecast unemployment using GDP, the CPI index and the industrial production index (INDPRO) as covariates. Since I am looking to use stationary time series, I gathered the ...
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1answer
38 views
Why did Germany not suffer from Great Inflation in the 1970s/80s?
Comparing the inflation rate of some of the industrial countries around 1975 (Great Inflation) in between the two oil shocks of 1973 and 1979/80, it seems odd that most countries' inflation rate was ...
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1answer
41 views
Endowment economy
Consider an economy populated by two types of infinitely lived consumers, odd and even. There is mass one of each type of consumer. There is a single good in the economy. The economy starts at $t = 0$....
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1answer
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Problem with the definition of external debt
This is how external debt is explained in wikipedia:
"In public finance, external debt (or foreign debt) is the component of the total government debt which is owed to foreign creditors; its ...
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1answer
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What would the theoretical ramifications of a mass sell-off of United States bonds be?
If a sovereign nation or nations were to sell off large amounts (say 30%) of United States bonds, what effects would it have on the United States' economy and debt situation? I am guessing that a mass ...
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How to measure NDP?
NDP = GDP - capital depreciation
I tried to understand how to measure NDP but above identity doesn't seem to explain how to do it.
How to measure NDP, can anyone give me some explanation with a ...
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1answer
29 views
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 ...
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How can a country have both of its current account and financial account negative?
I was doing a research on France history record of its balance of payments. I found france was having current account deficit through out the past 13 years (since 2007). At the same time period, ...
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1answer
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Is there any economical rational for a government to maintain low property taxes and rather high work-related taxes?
I have recently heard an analyst arguing that where I live (Romania) we have very low property taxes (0.08% to 0.20% for residential buildings), but rather high work-related taxes.
This was presented ...