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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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when a=0, would economy accumulate more physical capital? Why?

Utility function is $U(c_t,l_t)=(1-a)ln(c_t)+aln(l_t)$ $l_t$ is leasure time $c_t$ is consumption Production function is $y_t=k_t^e(1-l_t)^{1-e}$ $k_{t+1}=i_t+(1-\delta )k_t$ where k is ...
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Daily variable for inflation

I was wondering if there is a way to account for daily inflation data. I have daily short-term interest rates, and I would like to convert them to real short-term interest rates. Can I just average ...
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Finding savings in an Overlapping Generations model

I have not seen this question asked anywhere, so I'm posing it here in case anybody else (hopefully) can help me get to the answer. In a nutshell, my question is: how do we arrive at the saving ...
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Are Investments positively or negatively correlated with interest rate

Having just begun self-studying economics, I apologise if this question is too simple. Do investments increase or decrease with increased interest rate? According to the small, closed economy model (...
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59 views

Perpetual Youth Model

I am reading the famous paper of Blanchard,1985. There are some fundamental stuff that I did not really get. 1) Why they call it "perpetual youth"? 2) On page 225, he mentions the cohort size. So, ...
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survival probability and integration by parts

I am trying to integrate by parts by using an indicator function. However, I am not really sure if it is a correct way to change the bounds of integral with indicator functions. I am trying to deal ...
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161 views

Inflation, Monetarism and Keynesianism

Is there a strict division between the Keynesianism and Monetarism on the view of inflation. In other words, does the push and pull inflation only belong within a Keynesian framework and does ...
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442 views

Assumptions of Ramsey Cass Model

Field of Economics became mathematical and model based. I can grasp the appeal of the model but fail to understand why do we introduce certain assumptions. (Actually I am trying to relax the ...
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142 views

The term “Most Favoured Nation” is misleading to me. Please explain

My understanding If Country A extends MFN status to Country B with reduced tariffs for a product, then it must treat all other nations in the same way. By this WTO encourages multilateral ...
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216 views

Long-,short-term interest rates and inflation

I just read about the "dynamics" of long-, short-term intreset rates and inflation. Does the logic go as follows? Centrals banks determine interest rates which in turn determine the short term rates. ...
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36 views

What could happen if a country changes their currency rate constantly?

Introduction Imagine this random country. "Yolistan", it is a new country that appeared after a war/revolution/independence/whatever. The currency it's the "Yolo" Yolistan needs to import resources ...
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What can explain increasing exports after default episodes?

I am going through a paper on sovereign default by Mendoza and Yue (2012), in which defaults are explained in terms of how firms that use foreign intermediate inputs lose access to international ...
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Optimal Time-Consistent Fiscal Policy with Finite Lifetimes

I am reading Optimal Time-Consistent Fiscal Policy with Finite Lifetimes by Calvo and Obstfeld. Here is the paper : Calvo and Obstfeld (1988) In fact, their model consists of two stages. In the ...
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What does the Leontief Inverse represent? (Intuitive Meaning or Real World Concept)

I encountered that nobody, even my profs and lecturers so far, has an intuitive way to explain what the Leontief inverse represents. Does somebody here? As most people here would know, it goes: $\ ...
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46 views

Post Brexit Referendum employment theory

According to Chuka Umunna, Labour MP for Streatham and prominent pro-EU campaigner: People were told: "if immigration levels fall, it will be easier to get a job, and easier to get a job that's ...
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662 views

How net capital outflow = net exports?

How net capital outflow is equal to net exports suppose I export a car to US and in return i got few thousand dollars then instead of acquiring any asset abroad i decided to bring money back to my ...
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Macroeconomics 101 Problem: Aggregate Demand Changes

Consumer spending initially rises by 5 billion for each 1% increase in household wealth. Investment spending initially increases $20 billion for each 1% decrease in real interest rate. The multiplier ...
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What actually is aggregate demand?

I have been tasked with teaching some students macroeconomics, and will shortly need to introduce them to the concept of 'aggregate demand'. Usually, this is defined by the following sort of equation: ...
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Consumer preferences and government spending

I am studying for an exam and I am focusing on different types of preferences and shocks and the respective responses. This problem has been causing me trouble. The representative consumer in an ...
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How Switzerland has significantly high cost of living as compared to its neighboring countries?

Despite being a small country (area-wise), how Switzerland can sustain a high cost of living? I get the logic that the pay of employees would be proportionally higher, so they can sustain a high ...
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just economic interpretation: Is every steady state a golden rule steady state?

Is every steady state a golden rule steady state in solow model? I know this question’s exact answer. I only want to ask for the following, When know that at steady state $\dot{k}=0$ And in solow ...
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112 views

Solow model golden rule with my exact answer

In a perfectly competitive Solow economy with physical capital accumulation, population growth and a Cobb-Douglas production function, show that the “golden rule” steady-state would be reached if at ...
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134 views

Improve my solution: Question on solow model

There is a question about Solow growth and Ramsey model, compared to solow model, the Ramsey model is better to explain growth patterns across countries because it predicts a slower convergence ...
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81 views

What accounts for the high GDP of the United States?

Wikipedia defines GDP as: Measure of the market value of all final goods and services produced in a period (quarterly or yearly) of time. So, I take it that the total value of all goods (and ...
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Will periodical increasing and decreasing cryptocurrency supply peg cryptocurrency to dollar effectivelly?

As far as I understand, in order to make cryptocurrency pegged to USD we need somebody to take the risks of exchange rates. So, if ratio CRYPTO to USD is at a given time 1CRYPTO:1,1 USD, then we ...
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Does savings lead to investment in physical capital?

In the introductory macroecon textbook I'm reading, it's made clear that savings=investment. Mathematically, this makes sense to me. However, I'm having trouble understanding the qualitative ...
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Effect of money supply on price level

Consider a macroeconomy defined by following equations M = kPy + L(r) ; S(r) = I(r) ; y = m ; Where M is money supply, P is price level, y is output, r is interest rate, while k,m are constants. S(...
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Retaliating against a foreign country's import tariffs

When Trump imposes tariffs on imports from China, he is hurting American consumers who won't be able to take advantage of cheap Chinese goods. If China was to retaliate by imposing tariffs on imports ...
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740 views

Quarterly GDP growth: YoY vs QoQ / terminology

Quarterly GDP growth can be calculated either in terms of YoY change or - in the case of seasonally adjusted data - in terms of QoQ change. (A third option would be to annualize the QoQ rate.) To ...
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Adaptation of new keynesian model

I'm looking for literature in new keynesian model adaptation to model price shocks. I'm aware of Blanchard, Olivier, and Jordi Gali. 2007. “The Macroeconomic Effects of Oil Shocks: Why Are the 2000s ...
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48 views

Balance of activities

Can you explain why the current account of a country is a relevant indicator for the stability of its economic development? I read about this but do not exactly see the link that qualifies it as a ...
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372 views

how to test endogeneity in a cross section data?

Maybe it is a silly question but I really do not know much about econometrics. I am trying to look at the relationship between environmental quality and final consumption expenditure. For this, I look ...
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44 views

intuitive interpretation of the marginal return/productivity of capital being less than one

Let's assume you have a production function, f, and you want to know how the output changes with respect to capital, everything else constant (ceteris paribus), so you want to know the marginal ...
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Does Household final consumption Expenditure include Consumption expenditure of Imported Goods

From World Bank, I got the Household final consumption Expenditure for many countries across time. I wonder if this consumption includes Consumption expenditure of Imported Goods / Import Volume? If ...
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Labour Market: simple macroeconomic modeling

I just started reviewing macroeconomic modeling for an upcoming entry exam, and I'm not sure about my answers in this application: Suppose that the economy of a country has a representative firm ...
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Expansionary monetary policy in case of Pigou effect

Suppose consumption is a function of income as well as real money balance(Pigou Effect) and we have other equations as the standard Keynesian model. I derived diagrammatically as well as logically ...
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Electric Vehicle effects on family and macro-economics?

What happens economically when cars last 1000,000 miles on cheap local energy? EV's can save an average family 2000 dollars a year on energy costs, and 2000 per year on automotive investment. That'...
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Why does capital initially reduce and then rise with an anticipated future decrease in taxes in the RCK model?

Consider the version of the RCK model where there is a government that runs a constant balanced budget. At $t_0$, the economy is in steady state, with constant tax $T_{old} > 0$ Then, at $...
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Natural borrowing/debt limit and other borrowing constraints

When confronted with the simple household consumption maximization problem under uncertainty (and with Arrow security sequential trading) $$\max_{\{c_t(s^t),a_{t+1}(s^t,s_{t+1})\}_{t=0}^{\infty}}\...
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How should the general public evaluate economic arguments?

This is a follow-up question to Why do economists disagree so much? I know little about economics - just enough to know that it's a complex field I don't understand. However I see economic arguments ...
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Must a market-based economy constantly expand?

I vaguely recall from my reading of Adam Smith’s “The Wealth of Nations”, during college, that he opined that a market-based economy must constantly expand. Is this recollection correct and, if so, ...
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A possible typo in Herbst and Schorfheide book of DSGE estimation

In a state-space representation, the measurement equation is something of this form $O_t=H_t s_t + u_t$, where $O_t$ are the observational data at time $t$, $H_t$ is a possibly time-dependent matrix ...
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Deducing eq. (39) of Sims (2002)

Here's the Sims(2002) paper How does one deduce equation (39) from that paper? Any help would be appreciated.
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Why is national debt bad if the central bank can keep buying bonds?

When I read about national debt, it's usually about how debt is bad because with too much debt, debtors would demand higher interest rates. Eventually the government can't pay the interest, defaults, ...
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Likewise to a Calvo setting, with adjustment costs is there a mismatch between micro and macro estimations?

In DSGE models, to achieve sticky prices, there are two important mechanisms: Calvo pricing, and Adjustment Costs(Rotemberg?). It's known that with Calvo pricing there's always a difference between ...
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Cleaning data for DSGE model estimation: An and Schorfheide (2007)

In Herbst and Schorfheide "Bayesian Estimation of DSGE Models", in the appendix named "Data Sources", they show several formulas relating the empirical data which should be used for the model. Here's ...
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A question about savings and investments

Hey all I am new to macroeconomics and I'm studying right now. I see in my notes that savings $=$ investments, $S=I$. I've searched a lot online to see why this is true and I've found a lot of answer ...
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a question on the endogenous growth model

I have such a question on the endogenous growth mode”: In the macroeconomics literature there are various ways in which the growth process in the Ransey-Cass- Koopmans model has been endogenized. ...
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Research at the county-level: Macro or Micro?

Is research at the county-level considered applied micro or applied micro? The standard undergrad definitions ("micro" = "individual", "macro" = "nation") are of no help with units of measurement ...
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Use Lag Operator to find Lifetime Budget Constraint

The budget constraint is $c_t + \tau_t + s_{t+1} =w_t(1-l_t) +(1+r_t)s_t$ And assume $\underset{t \longrightarrow \infty}{lim} \ \displaystyle{\frac{s_t}{\Pi_{i=1}^{t-1} (1+r_i)}} = 0$ Lag ...