Stack Exchange Network

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

Questions tagged [macroeconomics]

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

25
votes
6answers
3k views

Is zero inflation desirable?

Is zero inflation really desirable? To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding ...
34
votes
11answers
6k views

What is the economic purpose of increasing the minimum wage?

It is generally accepted among economists that minimum wage warps the equilibrium point between the supply and demand of labor by instituting a price floor and increases unemployment for unskilled ...
65
votes
13answers
15k views

Fundamental equations in economics

For the other sciences it´s easy to point to the most important equations that ground the discipline. If I want to explain Economics to a physicist say, what are considered to be the most important ...
15
votes
5answers
4k views

How do economies grow?

These days, we hear again and again about the so-called "need" for economic growth. But how do countries actually grow economically? That is, why/how does their GDP increase over time? Related, what ...
10
votes
2answers
2k views

What is the Gross Domestic Product (GDP)?

I suppose GDP is supposed to create a measure of a country's wealth/welfare, something easily indexable. But how exactly is it composed? And is its composition disputed? How good is it at measuring a ...
8
votes
2answers
1k views

What would happen if the world switched to a single currency?

What would happen if all countries suddenly stopped using local currencies and adopted a global currency (like the Euro, but for everyone)?
8
votes
6answers
3k views

Mathematical Micro/Macro Economics Textbook Recommendation

I was formerly an economics major and now also majoring in mathematics. I want a textbook that is rigorously based on mathematics; not just using mathematcis whenever the author wants, but in a more ...
24
votes
4answers
2k views

From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
36
votes
7answers
2k views

Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across Acemoglu, Johnson and Robinson (AJR) paper on The Colonial Origins of comparative development: An Empirical Investigation, and this paper seemed so '...
13
votes
7answers
2k views

Textbook for macroeconomics (advanced undergrad)

I find that many contemporary macroeconomics textbooks are too applied, filled with examples, case studies and intuitive illustrations, often at the expense of quantitative rigour and therefore the ...
11
votes
2answers
369 views

The Case for Basic Income in developed and underdeveloped countries

From what I can tell, the idea of the basic income guarantee is very popular in some circles as an excellent alternative to a lot of modern welfare systems. Has anybody developed a theoretic or ...
6
votes
1answer
273 views

Present value of a payment

Suppose I've just won 1'000'000 dollars in a game show. At the end of the program they tell me that they will pay me the prize as following: they will deposit in my bank 50'000 dollars every year for ...
3
votes
2answers
844 views

Why is modest inflation a good thing? [duplicate]

I have been reading a BBC news article about inflation in the UK, which is saying that inflation has recently become negative (http://www.bbc.co.uk/news/business-33147660). The article suggests that ...
10
votes
2answers
884 views

Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
21
votes
2answers
2k views

Should we expect more structural technological unemployment if growth becomes more limited by natural resources and less by labour?

Technological unemployment, where unemployment arises from (with some oversimplification) workers being replaced by machines, has so far been temporary as new jobs were created that replaced the old ...
17
votes
5answers
2k views

Unemployment and the Minimum Wage---what are the main counter-arguments to Card and Krueger?

Card and Krueger's paper (AER 1994, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania") uses a difference-in-difference identification strategy to ...
15
votes
2answers
661 views

Complete Markets in Continuous Time

In the standard discrete time economies with a finite number of states, $n$, a complete markets economy is simply an economy with $n$ independent assets (Think Ljunqvist and Sargent Chapter 8). This ...
10
votes
3answers
4k views

Log-linearization of Euler equation with an expectation term

There are a few online resources available to help with log-linearization (e.g., here or here). However, log-linearization where an expectation is involved is a little tricky because the log can't ...
9
votes
3answers
321 views

Is there an alternative metric to GDP that measures a country's assets rather than flows?

The Gross domestic product measures the value of all final goods and services produced in a period. This has some limitations. For example, if a car hits a lightpost and both need to be repaired and ...
5
votes
2answers
6k views

How do I change the base year of real GDP using the GDP deflator and nominal GDP?

I'll use the US as an example. I have three data series nominal GDP $(Y)$ real GDP in 2005 USD $(\bar{Y})$ the GDP deflator $(d)$, with 2005 as the base year, so $d_{2005} = 100$ I want to change ...
4
votes
1answer
95 views

what was the world's wealth in 2015?

I was reading an article from 2015 stating that 1% of the world has half of the world wealth. They have several figures such as the world's billionaries have around 7 trillions dollars or the global ...
3
votes
4answers
718 views

What is the relevance of economic growth?

Economic policies often mention high economic growth as a desirable path. For example, "We started to lay a new foundation for stronger, more durable economic growth." -- President Obama, ...
3
votes
2answers
2k views

Intuition behind the positive slope of LM curve : 'Income must increase'?

Source: by John Floyd PhD (in Economics; U Chicago) The intuition behind the positive slope of LM is as follows: An increase in the interest rate reduces the demand for money and an increase ...
1
vote
1answer
291 views

How is monetary policy fair in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
5
votes
1answer
213 views

Will a Guaranteed minimum income not eventually just be crowded out by inflation?

That is, if we implement a guaranteed minimum income, would inflation not eventually rise to a point where it is essentially useless? I would expect prices to be adjusted knowing people have a certain ...
4
votes
2answers
8k views

Does GDP count both the investment and the house rental?

Suppose you bought a new house in the year of 2010. Then the price of the house in counted toward the 2010 GDP. Say then you live in the new house in the following years. So in these years, the GDP ...
54
votes
4answers
11k views

Why do economists disagree so much?

I'm coming at this from a scientific point of view, having had no formal training in economics - most of what I know about it was from self-studying an undergraduate economics textbook. My question ...
8
votes
1answer
8k views

No Ponzi game condition and transversality condition are the same?

Given the following non-stochastic planning problem with finite horizon, \begin{align} &\max_{\{k_{t+1}\}}\sum^T_{t=0}\beta^tU[f(k_t-k_{t+1})] \\ \text{s.t. } & 0\leq k_{t+1}\leq f(k_t)\\ &...
10
votes
2answers
1k views

What is the difference between “aggregation” and a “representative agent?”

What is the difference between "aggregation" and a "representative agent?" I'm sorry if I'm not entirely clear on this question, but that's why I ask. It seems to me as if a representative agent is ...
9
votes
3answers
318 views

Which capital accumulation is right? $K_t = (1-\delta)K_{t-1} +I_t$ or $K_t = (1-\delta)K_{t-1}+I_{t-1}$?

In a lot of models with capital, I find different variants of capital accumulation formula as follows: $K_t = (1-\delta)K_{t-1} +I_t$ or $K_t = (1-\delta)K_{t-1}+I_{t-1}$ Which one is more ...
6
votes
1answer
2k views

Infinite Horizon Transversality Condition

This question is an extension of Endogenous Growth: Balanced Growth Path with CRRA Utility however, this question asks about a specific concept used in that question, and I think it would be helpful ...
6
votes
1answer
126 views

why is labor $h_t$ often average working time percentage of non-sleeping time in RBC?

Cobb-Douglas production is often given by $Y=AK^{\alpha}L^{1-\alpha}$, and $L$ is often just labor. But in RBC model, I notice that labor $h_t$ is restricted to $[0,1]$, and interpreted as working-...
6
votes
4answers
14k views

Calculating rate of growth of per capita income

Given this question: National income is increasing by 1.5% a year and population by 2.5% a year. What is the rate of growth of per capita income? Attempt: Since per capita income is GDP/ ...
12
votes
2answers
2k views

Why in most macro models technology is labor-augmenting?

Take Romer's advanced macro book as reference. In it the Solow model,the Ramsey model and the Diamond OLG all contain the fundamental $A_t$ variable representing technological progress. In all these ...
6
votes
1answer
895 views

Deriving formulas from Gali's book on the New Keynesian model

I've found this link with all the derivations from Gali's book on New Keynesian model. In page 13, eq. $(3.7)$, the author derives the optimal price-setting rule $P_t^*$ by a representative firm that ...
6
votes
6answers
838 views

Graduate Level Textbook on Labor Economics and Macro-Labor

What would be good textbooks at the graduate level that deal with Labor Economics and Labor-Macro (As in, Equilibrium Unemployment Theory, Shimer Puzzle etc)?
5
votes
3answers
524 views

Solution Method for Infinite-Horizon Maximization Problem

Full disclosure: this problem was part of a final exam that none of our class could really solve definitively. Below the general form is a specific utility function we worked with that I'll try to ...
4
votes
2answers
1k views

Steady state Solow model with exogenous technological change

Consider the following question: So, assume the standard function for production: $$Y_t = A_t K^\alpha_tL^{1-\alpha}$$ where $L$ is fixed. Then, the growth rate of output is: $$g_Y \approx g_A + ...
4
votes
4answers
283 views

How is money created?

This might seem like a really simple question, but I am really troubled by it on a macro scale. The money has to come from somewhere. Someone might start up a business that creates things or takes ...
3
votes
1answer
108 views

Where do I find the US GDP growth on FRED? [closed]

I have never used FRED before. I need to locate the annual growth rate in Real GDP to do some data analysis for my intro macro class. The TA and the Prof were utterly unhelpful and I'm frankly lost. ...
2
votes
2answers
470 views

Books to self-study applied econometrics

I'm a student and I'm interested in focusing on the application of econometric theory to "practical" situations. It would be great if you can suggest freely available books along with those that are ...
2
votes
1answer
952 views

How to show the production function is concave in K and L but not strictly so?

Suppose we have a production function with constant returns to scale. Let us denote it by $F(A,K,L)$ where $A$ is the technology, $K$ the capital and $L$ Labor. Further assume the first partial ...
12
votes
3answers
854 views

What benefits does Bitcoin (i.e. cryptocurrency) offer?

I really, really like moderate inflation. I live in Sweden where the interest rates just went negative because we are on the brink of deflation, and the rate of inflation we have now is far too low. ...
9
votes
3answers
1k views

In log-linearized New Keynesian model, what do $Y$, $Y_t$, $y_t$ actually mean?

This may be a weird question, but I am unfortunately confused by terms. Let us suppose log-linearized New Keynesian model as suggested by Gali here: http://crei.cat/people/gali/pdf_files/monograph/...
8
votes
1answer
10k views

Lagrangian: How to understand the No-Ponzi Condition

In http://www.uni-hamburg.de/fachbereiche-einrichtungen/fb03/iwwt/makro/slides2.pdf page 8, lagrangian is written as follow: $$L = E_0 \sum_{t=0}^{\infty}\beta^t\{U(C_t,N_t) + \lambda_t(P_tC_t + ...
6
votes
3answers
870 views

Has the natural rate of unemployment decreased with modern travel and the Internet?

The natural rate of unemployment is a combination of structural unemployment and frictional unemployment. Structural unemployment is caused by a surplus of labor at a given wage in a given area. ...
6
votes
2answers
110 views

Who regulates the balancing of the books for commercial banks and how is this done? Is it public information?

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
6
votes
2answers
850 views

CES production function estimation

Introduction There are different ways of estimating the parameters of a production function. For example, single-equation and system equation techniques are both possible. Another difference among ...
5
votes
1answer
380 views

Endogenous Growth: Balanced Growth Path with CRRA Utility

I've got a model of endogenous growth due to spillovers. $\textbf{Model:}$ $$K_t=\frac{1}{n}\sum_{t=1}^nk_t$$ In this model, $k_t$ is chosen by agents, and $K_t=\bar{k}_t$ (the average of all $k_t$). ...
4
votes
1answer
234 views

Efficient Market Hypothesis and constant ex-ante real interest rates?

According to Hayashi's Econometrics (page 151), efficient market hypothesis is a joint hypothesis combining: Rational expectations $\rightarrow$ expected inflation$= \mathbb{E}(\pi_{t+1}|I_t)$, where ...