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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96 views

Replicating a state-space model

I am trying to replicate the results of Cochrane, 1998. Most of the paper is just describing the theory behind The Fiscal Theory of the Price Level. But from p. 42 he begins the econometrics aspect. ...
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Proof monotonicity on Blackwell sufficient conditions

I need to prove monotonicity assumption on Blackwell’s sufficient conditions for a contraction, that is: Given the operator T defined as $(Tf)(x) = sup [F(x,y)+bf(y)]$ I need to show that $f\leq g\...
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1answer
282 views

Labour markets and supply-side policies: too much stress put on the WS push factors?

In reading several macro textbooks, it seems that most of the supply-side policies tend to be focused on the labour supply side (wage setting curve), instead on the firm/labour demand side(price ...
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39 views

When do workers versus capital owners share of income increase?

The share of total income obtained by workers rather than capital owners is for obvious reasons of interest. Assuming that the economy can be desribed by an aggregate production function $$Y = F(K,L)$$...
5
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1answer
2k views

Estimating the rental rate of capital from data

Take the classic optimization problem of the neo-classical firm: \begin{equation} \begin{array}{*2{>{\displaystyle}r}} \mbox{maximize (over $K, L$)} & f(K, L) - RK - WL \end{array} \end{...
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190 views

Consumption-Leisure Elasticity

The macro-literature insists on a consumption-leisure elasticity of 0 to match the balanced growth fact of constant labor supply. Is there any paper that tries to evaluate this elasticity using ...
5
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119 views

Why is poverty worse in larger cities?

In inner cities in the US there is more poverty (as a proportion of the population) than in mid-sized cities or small towns. Do we have a definitive answer as to why this is?
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57 views

Neoclassical Two-Sector Model of Endogenous Growth: Getting the consumption growth rate

I'm struggling to derive the growth of consumption from a two-sector model with the traditional Cobb-Douglas function. The model I am speaking about incorporates the fractions used by physical and ...
4
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62 views

Combining functions that satisfy the Inada conditions

Suppose $f: \mathbb{R} \to \mathbb{R}$ and $h: \mathbb{R}^n \to \mathbb{R}$ are functions that satisfy the Inada conditions, and also $$ \forall i: \lim_{x_i \to \infty} h(\mathbf{x}) = \infty. $$ ...
4
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44 views

Mechanics of Sterilized Intervention?

I'm looking to see if someone can help improve my understanding of sterilized intervention in FX markets. My intuition/understanding is: Assume that the domestic currency is depreciating, perhaps ...
4
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1answer
81 views

Negative Inflation, AS/AD framework, What Graph to use?

My macroeconomic homework contains the question below, and I'm not sure what graphs we're suppose to use to solve it. I believe I can answer the whole question using the IS-MP Diagram, but do I need ...
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3k views

Multiplier in the two-sector Keynesian model

Which of the following is most likely to reduce the size of the multiplier in the simple (2-sector) Keynesian model? Increased taxes on savings Reduced access to government funded medical care ...
4
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1answer
98 views

If the economy is not always on the Price setting curve, can the Central Bank target unemployment?

In the usual textbook model, in which there's imperfect competition, the economy is always on the Price-Setting(PS) curve, and to have a target unemployment level, above equilibrium unemployment, will ...
4
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1answer
446 views

Criticism of “Modern Political Economics” by Varoufakis, Halevi, Theocarakis

The book "Modern Political Economics" is quite critical about "neoclassical economics", the basic claim being, if I understand correctly, that the models which "neoclassical economics" (armed with ...
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22 views

Derive optimal wage in New Keynesian-Calvo wage stickiness

Following Costa, 2016 in page 96, developing the labor variety optimal wage decided by the household, the FOC is: $$0=E_t\sum_{i=0}^\infty(\beta\theta_w)^{t+i}\left\{\psi_W\left[L_{t+i}\left(\frac{W_{...
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48 views

Stochastic Ak model

$$V^*(A_0,K_0)=max\sum\beta\sum P(A^t)\frac{c_t(A^t)^{1-\sigma}}{1-\sigma}$$ st$$ k_{t+1}(A^t)+c_t(A^t)\leq Ak_t(A^{t+1})$$ $$A_t=1+u_t$$ $$u_t=\rho u_{t-1}+e_t$$ $$c_t(A^t),k_t{t+1}(A^t)\geq 0 \...
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83 views

Social Planner problem: two period

The production function is $F(K_t,N_t)=AK_t^\alpha N_t^{1-\alpha}$ and depreciation $(\delta)$ is equal to 1. The given preferences are as follows: $$U(c_1,l_1,c_2,l_2)=\gamma log(c_1)+(1-\gamma)log(...
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What's the difference between Gregory Mankiw's “Macroeconomics” 4th ed. and 10th ed.?

I am planning to use Gregory Mankiw's Macroeconomics (not to be confused with his Principles of Economics) for self-studying macroeconomics, along with David Weil's Economic Growth. As you can see, ...
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37 views

Calvo Price setting in a Multi-sector NK Model

In Calstrom-Fuerst-Ghironi (2004) "Does It Matter (for Equilibrium Determinacy) What Price Index the Central Bank Targets?", they used a standard two-sector NK model, and the optimal price ...
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26 views

Impacts of Suspending Mortgage and Rent Payments

Recently, there has been some support for suspending rent and mortgage payments, the goal being to provide financial relief during the Covid-19 response. I'm wondering what the impacts for the ...
3
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42 views

Elasticity of substitution in leisure

This might be a very basic question, but I am a beginner in macro models. I would appreciate help with my doubt. In different papers I have read about the elasticity of labor supply or the inverse of ...
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25 views

How to interpret the sum of company revenues?

The introduction to the Fortune 500 states: In total, Fortune 500 companies represent two-thirds of the U.S. GDP with $13.7 trillion in revenues. I checked, and this is indeed the sum of those 500 ...
3
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135 views

Log-linearizing a non-separable utility function around the steady state

I've started reading Jordi Galí's Monetary Policy, Inflation and the Business Cycle (2nd ed., 2015). In section 2.5.2, Galí considers an example with the following non-separable period utility ...
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52 views

Can technical change have a negative growth rate?

Using the following nested CES function I have backed out augmentation indices $A_L$ and $A_E$. Where $A_L$ is a labour-augmenting technical change index and $A_E$ is an energy-augmenting technical ...
3
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1answer
125 views

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 ...
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646 views

Market clearing condition with Walras law

I have a diamond overlapping model The question is as follows Let us consider an infinitely lived production economy populated at time t by $N_t$ identical and perfectly competitive adult ...
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99 views

Does Economic Growth Lead to Inflation?

As an answer to this question, it was stated that Economists believe that higher growth rates tend to also mean higher inflation rates. As a non macro-economist, I am wondering if this is true? ...
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2k views

Has Trickle-Down economics ever worked?

With "trickle-down economics" on the tongue of Americans this year, I wanted to do some research. The prevailing opinion is "trickle-down economics doesn't work." I can find many resources which ...
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66 views

Why is money super neutral in Brunnermeier and Sannikov's I theory of money?

I'm wondering why money is super neutral in Brunnermeier and Sannikov's "I-theory of money", but is not super neutral in their 2016 AER paper "On the optimal inflation rate". In the I-theory of money,...
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584 views

How to self-study graduate level macroeconomics? Is there even a point?

As I had hoped to learn enough macroeconomic theory to get some research ideas, my goal at the beginning of this summer was to read through and complete the problems in an introductory advanced ...
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45 views

What would be the consequences of universal parity of buying power (wage value) and freedom to buy?

I've wondered about this for many, many, years..... maybe there's an answer (or several answers?) after all. As the global economy is set up, one reason a person in the US and EU can afford a nice ...
3
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308 views

Recursive assumption - Identifying exogenous monetary policy shocks

I am reading through "Monetary Policy Shocks: What Have we Learned and to What End?" and am hoping someone here can offer a bit of clarity about a claim made within about how measurement error in data ...
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81 views

Transportation models in economics

How would one go about modelling the effectiveness of public transportation? More specifically how does one go about comparing two transit systems in terms of their ability to move a larger numbers of ...
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117 views

Optimal monetary policy under commitment & FOCs

Clarida, Gali, Gertler(1999) show the optimal monetary policy problem of central bank for minimizing loss function under "Commitment" is a output gap, is a inflation rate, ~AR(1) is a supply shock. ...
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138 views

Question about M.I.U. model - Walsh

I am solving practice problems in Walsh. This is from 3rd edition page 87. Question 1. I have max: $$U=\sum\beta^iU(c_{t+i},\frac{M_{t+i}}{P_{t+i}})$$ s.t. $$\omega_t=f(k_{t-1})+(1-\delta)k_{t-1}+...
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27 views

Have there been any structural changes in the market that would lead the indexes to be trading so high?

If you look at this graph of the SnP500: You will see that it is trading at levels higher than pre 08 or 99. What systemic structural changes in the market have led it to be trading so high? I think ...
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605 views

With a depreciation of real exchange rate, what happens to the trade balance equilibrium output?

Let the real exchange rate $Q=\frac{P^*e}{P}$, where $P^*$ is the 'world' price level (everything with '*' is of the 'world'), $P$ is the domestic price level, and $e =\frac{\text{Home Currency}}{\...
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78 views

Is $\frac{ \Delta \ \text{endogenous variable}_1 }{\Delta \ \text{endogenous variable}_2}$ well-defined … and what is it?

When solving economic models, wec get expressions of endogenous variables (say, production $P$, or consumption $C$) in terms of parameters or exogenous variales, and we can then ask what the change in,...
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155 views

Kolmogorov-Forward-Equation with Entry and Exit

I'll try to ask this question in the most simplistic environment possible, so lets think about a household that can consume and save. After some cumbersome work, we have solved for the optimal savings ...
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39 views

Real time data map about the amount of a currency that are held in the world ?

Where can I see in real time data about the amount of a currency that is held in central banks (and maybe other significant places) ? A map would be great. I would like to know if there is an ...
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0answers
43 views

Research on the link of QE and increased economic activity

Im looking for good literature of quantitative easing and the effects on economic actitivty. from a modelling perspective Any empirical research? What I am thinking of, is how much of an effect ...
3
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1answer
51 views

How can the Fed enforce exit criteria if they begin yield curve control?

Over the past year, the notion yield curve control has resurfaced and appeared on FOMC minutes, decades after its last implementation. According to the Fed's introduction page: As the U.S. continued ...
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56 views

Is Reinhart and Rogoff mistake also present in similar 'minded' studies?

In Reinhart and Rogoff (2010), the authors purported to have found empirical evidence that going over the 90% of public debt threshold was harmful for the country. However, in 2013 (I think), after ...
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27 views

Additive or multiplicative decomposing?

I am going to decompose one of my time series. My goal is to get rid of the seasonal component. It looks like this: The last picture is: log(next value/present value) I have understood that if the ...
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26 views

Do you know how to compute the IRF of a GARCH (1,1)

We have the following model (GARCH (1,1) ) $y_t=\sigma_t\epsilon_t$ $\sigma_t^2 = \omega + \beta*\sigma_{t-1}^2 + \gamma*y_{t-1}^2$ Note that we can rewrite the latter as: $\sigma_t^2=\frac{\omega}{1-\...
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0answers
31 views

Remove seasonality in R

I have data of total exports of fish from my country in the time period 2010-2020. Since our currency (NOK) has gotten weaker to the currencies we are trading with, we have gotten a lot more value ...
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0answers
27 views

Derivation question: Gali (2015), chapter 5, equation 25

I am wondering how Gali derived equation (25) in chapter 5 of his book Monetary Policy, Inflation, and the Business Cycle (2015). We have equation (21): $$ \vartheta \hat{x}_{t} = -\kappa \hat{p}_{t} +...
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0answers
14 views

Liquidity puzzle in the representative household model

In a cash in advance representative household model, the nominal interest rate may be determined by $$\frac{1}{1 + i_t}= βE_t\left(\frac{M_t}{M_{t+1}}\right)$$ where $\beta$ is the discount rate. I'...
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45 views

Cake eating problem

Consider an infinitely lived agent born in time zero, endowed with a cake of size $x_0$. The cake is storable (without depreciation) and infinitely divisible. The agent derives contemporary utility ...
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29 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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