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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Persistency in a VAR model

VAR, SVAR, BVAR, TVP-VAR, etc, I have a feeling that the persistency of the impulse responses will not change much irrespective of the model, even if impulse responses in the first period of the shock ...
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How common is instantaneous capital production

In macro growth models, consider the following versions of the capital evolution: $k$ is capital, $d$ is a depreciation rate of the capital, and $i$ is an investment. $'$ represents the next period. $$...
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Would some help me fill in missing steps from a textbook exercise left for the reader

Question: Suppose $C_t=(1-s)Y_t-\lambda G_t$ where $s>\sigma$ as in the basic Solow model. Out of the government expenditure , proportion $\phi$ is invested in public capital formation. Hence we ...
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Economic interpretation of Returns to Scale

There are three possible types of returns to scale: increasing returns to scale, constant returns to scale, and diminishing (or decreasing) returns to scale. If output increases by the same ...
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What makes a company too big to fail?

I have read the too big to fail Wikipedia and as far as I understand, a company is too big to fail (and thus will receive government bail-outs) if it's failure has a significant impact on an important ...
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1answer
26 views

Would someone be able to help me solve capital per capita in the steady state (check my work)

Question: Suppose $C_t=(1-s)Y_t$ where $s>\sigma$ as in the basic Solow model. Solve for capital per capita in the steady state. $Y_t=K^{\alpha}_tL^{1-\alpha}_t$ $Y_t=C_t+I_t+G_t$ $K_{t+1}=I_t+(1-\...
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1answer
15 views

Share of domestic and foreign monetary flows between sectors of a country

In multiregional input-output analysis, monetary flows between or within economic sectors are given in a transaction matrix T. Both, the rows and the columns, have the same index (Region 1 Sector 1, ...
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Macro Economics [closed]

a. Suppose the number of employed people is 20.5 million. The unemployment rate in this economy is 8.8 percent, and the labor force participation rate is 65 percent. i. What is the size of the labor ...
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Quadratic utility: monotonicity and risk aversion

I am taking macro class this fall. One of the problems asks whether decreasing absolute risk-aversion and ever-increasing consumption are two unattractive implications of the quadractic utility ...
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Demand Shock Example [closed]

What are some of the examples of temporary and permanent demand shock? What is the effect of a temporary and permanent demand shock on IS curve?
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How successful are co-operative business models are in India?

Amul was one of the most successful co operative business model in India , However I haven't see other co operative models as successful as Amul is my statement correct ? What are the challenges faced ...
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Applying modern economics to Edgeworth's Hedonical Calculus

Preface The late 1800s was a genesis for many economic theories. As math spilled over into the social sciences, one of the more obscure applications of measurement was: Hedonical Calculus, developed ...
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Rule of thumb for confidence level

Typically in statistical software, the default confidence level is 95%. The higher the better, I suppose. But this is still not a rule of thumb, right? In Stock and Watson's paper (https://www.aeaweb....
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How to assign a set of parameters to a macroeconomic model in Matlab?

I am trying to assign a vector of values (v= [1/3 0.01 0.5]) to a vector of parameters (w = [alpha beta gamma]) in order to make ...
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1answer
43 views

Empirical justification for a constant-returns-to-scale production function in the Solow model

I am currently learning the Solow model of growth, where a constant returns to scale production function for the economy is assumed. I realise that the assumption makes further analysis much simpler, ...
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How can I distinguish between those factors that affect supply elasticity and those that shift it?

How can I distinguish between those factors that affect supply elasticity and those that shift it? I am trying to make two regressions, one with the determinants that affect its elasticity and the ...
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1answer
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Estimating $TFP$ using Cobb-Douglas production function

Suppose we want to estimate total factor productivity (TFP) under time series framework. Let assume that the production function is given in the Cobb-Douglas form, i.e. $$Y_t=A_tK_t^\alpha L_t^\beta,$$...
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1answer
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Matlab: Solow Model Convergence of capital

I am currently trying to create a while-loop which iterates the evolution of the capital stock until it converges on the n-th digit. As I am still quite new to Matlab I face a lot of problems. I would ...
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2answers
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Difference between Income-Expenditure Identity and the Goods Market Equilibrium condition

Is there any difference between the Income-Expenditure Identity and the Goods Market Equilibrium condition. Both are $Y=C+I+G+NX$. If it is an identity, why do we solve for the equilibrium output? ...
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1answer
30 views

What is the long run equilibrium in layman's terms?

My textbook states An economy's long-run equilibrium is the position it would eventually reach if no new economic shocks occurred during the adjustment to full employment. You can think of long- run ...
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IRFs for time-varying VAR models

I want to fit a time-varying VAR model to my data because of a structural break occurring midway in the sample. But I want to plot IRFs, not for the entire dataset, but for the pre-structural-break ...
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What are the values of the Laffer curve for Argentina?

According to this article, (spanish only) Argentine companies pay 106% of taxes for their revenues Supposedly the Laffer curve is different from country to country. Which are the tax rate values at ...
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Why does increasing the money supply decrease the interest rate in layman's terms?

If money supply increases, then I will have more money in my pocket to spend more. I imagine that prices will also increase over time to adjust to there being more money in circulation. Is it because ...
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1answer
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Matlab: While loop in function

I am new to Matlab (& also to stackexchange) and I need to learn it for a dynamic Macro class. I have trouble using a while loop in a function. The function is supposed to calculate the amount of ...
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1answer
44 views

IS LM CURVE QUESTİON

For keynesian model, Describe how, if at all, each of the following development affect the IS and/or the LM curve, and the equilibrium (r; Y ): Investment demand becomes less sensitive to the interest ...
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1answer
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How does Net Foreign Assets (NFA) differ from Net Foreign Investment (NCO)?

How does Net Foreign Assets (NFA) differ from Net Foreign Investment (NCO)? Yes, the former counts assets, and the latter counts investment, but I can't quite wrap my head around the difference.
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A Cake Eating Problem in Continuous Time: Hamiltonian or HJB?

Your standard continuous time cake eating problem is defined as follows: $$\max_{c(t)}\int_0^\infty e^{-rt} \ln (c(t)) dt$$ subject to $$f(k(t))=k(t)$$ $$\dot{k}(t)=-c(t)$$ Approaching this problem by ...
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1answer
21 views

Economic and Statistical Significance Of Coefficient

I want to know If I am comprehending these terms correctly Summarizing the difference between economic and statistical significance of coefficients (Describing the terms, process of assessing each ...
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20 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 ...
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1answer
21 views

Keynesian model functions

In The Keynesian economy, I have the following model Here, the production function $F(N,K) = Y/K = A(N/K)^{1.10}$ and by the labor demand function $F_N(K,N)= N/K= b_0(w/p)^{b_1}$. right? That is, ...
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1answer
29 views

Why the Federal Funds rate isn't detrended in a VAR model?

In FAVAR (factor augmented VAR) paper (https://faculty.wcas.northwestern.edu/~lchrist/finc520/QJE.pdf), the following transformation code is applied to the data: 1—no transformation; 2—first ...
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1answer
20 views

How to estimate “necessary” economic output using Leontief input-output impact analysis? In particular: how to handle imports

I'm trying to estimate what the "necessary" economic output of a society is using Leontief input-output impact analysis. The data I have available is OECD input-output tables (see link). I'm ...
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43 views

Why doesn't stock market help to boost the economic growth directly?

For example, during the recession, the central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing&...
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42 views

K-shaped recovery - is there a benign explanation for it?

I am often skeptical of emphasis placed on this "alphabet soup" that has surrounded the shape of the economic recovery. Given the uncertainties at play with this type of forecasting, it may ...
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1answer
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Does estimating OIRFs from an SVAR (with uncorrelated errors) mean we are orthogonalizing the error structure twice?

In a normal VAR, we can orthogolize the errors via Cholesky decomposition and estimate OIRFs. Thus, transforming the structure of the errors so that they do not correlate. In an SVAR, asumming we ...
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why significance of lag variables are often not reported in VAR model papers, but just IRFs?

I am reading this VAR model paper https://www.rieti.go.jp/en/publications/summary/15030006.html which does not report the regression results of the VAR model, but just IRFs and historical variance ...
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1answer
24 views

Solow model and a change in the savings rate

In the solow model why does an increase in the savings rate shift the investment curve instead of move along it? Intuitively not mathematically Thanks
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2answers
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Why does a rise in the savings rate result in an increase in the capital stock intuitively?

I understand mathematically how it works. But what is the actual process intuitively. Thanks
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Estimating FAVAR model step by step

everyone. I want to estimate an FAVAR model step by step in python to better understand how the algorithm works. Here is my approach, kindly let me know if it makes sense. Step 1: Separate ...
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33 views

Question about the Law of Supply

I have a contention with the Law of Supply's dictum "if the price of a good falls, then the quantity supplied of that good falls, ceteris paribus." Imagine a market for widgets produced by ...
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1answer
20 views

How did Bernanke et al obtained IRFs of variables not included in their baseline FAVAR model?

In the original FAVAR paper by Bernanke et al, how did the authors obtain the IRFs of industrial production (IP) and CPI in their baseline model (as shown in figure 1)? Their 'preferred' baseline ...
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1answer
21 views

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 ...
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Unemployment rates in US during COVID-19

Does the COVID-19 pandemic affect the unemployment rate in US?
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Does quantitative easing favour banks?

The reserve bank recently announced it would print $100B over 6 months, and spend this buying back gov bonds. Will this policy advantage the financial sector over other parts of the economy? Why ...
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1answer
39 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 ...
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36 views

Asset bubbles and empirical findings for monetary stimulus' effect on productivity

It may be fairly empirical that leveraged investments can cause "asset bubbles" that often result in really highly priced assets (which I'll refer to as the ("leverage argument") --...
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1answer
52 views

Intuition for effect of interest rate changes in New Keynesian model

I am trying to understand the intuition behind the effect of an interest rate change in a simple New Keynesian model (or really in any sticky price model). As a simple example, I take (roughly) the ...
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28 views

Does treasury pay interest+ face value to the fed?

heard all the profit that the fed makes goes into treasury.. does that mean the treasury department can make unlimited money buy selling bonds to the fed? like if they issue bond to people, and the ...
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Price elasticity of demand of CES

Anyone would like to help me show the following ( or a book/paper reference would be a great help) " The price elasticity of demand is equal to $\sigma$ for the demand function of CES preference,...
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2answers
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CPI dataset from BLS

I hope this question is not inconvenient for any of you, so I would appreciate if you do not mark it as not useful. I want to work with the data of the CPI from the BLS (I am not American, and this is ...

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