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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2answers
30 views

How to interpret fixed effect regression R-sq. results for panel data?

I runned a fixed effect regression in Stata (xtreg, fe) for panel data. I obtained below R-sq. results. How should I interpret them? Which one is my main interest(within,below or overall)? How can I ...
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Should unemployment caused by the government closing non-essential businesses during quarantine be counted as structrural unemployment?

I have following definition of structural unemployment: Long-term unemployment caused by shocks or permanent features of economy making it harder for certain workers to find a job So the answer to ...
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3 views

FDI, FPI relation with interest rates

I understand how a rise in interest rate might lead to an inflow of capital into debt securities, however wouldnt these Foreign Portfolio Investments (FPI) remove their funds from equity. And for ...
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Reason for the increase in aggregate demand due to the existence of black money

How can existence of black money amd black assets due to corruption, tax evasion etc., increase the aggregate demand? Can anyone explain this with an example?
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1answer
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Meaning of the sentence

I am having trouble understanding this economic concept: Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal ...
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2answers
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Isn't recession is when there's an actual decrease and not just a less rapid growth?

I heard that for 2020, the global economic forecast is recession. The growth will be less than 2.5%. But isn't recession is when there's a decrease in GDP (for two consecutive quarters, as I recall), ...
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1answer
45 views

Shouldn't the total global debt amount to zero and not $253 trillion?

In Jan 2020, the Institute of International Finance (IIF) came out with a report (read summary here) that the total global debt is expected to climb to a new all-time high of more than $257 trillion ...
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34 views

Federal Reserve Leveraging of COVID-19 Fund

Reading an article in The New York Times about the COVID-19 stimulus bill, I stumbled on this detail the Fed can take a limited amount of funds and deploy them widely: The central bank only needs ...
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What are the exact sources of CARES Act economic transfers?

The bill Coronavirus Aid, Relief, and Economic Security Act provides "2 trillion". (There is also H.R.6201 - Families First Coronavirus Response Act providing aid.) From which sources will the ...
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1answer
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How do deal with negative values when finding log difference?

I’m trying to run a regression with GDP quarterly growth as the dependent variable. I’ve been asked to find the log diff of the data values however I’m unsure on how to do this on excel and how to ...
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what would be an efficient investment when central banks have massive qe?

Recently the central bank said in a statement on its website. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift ...
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2answers
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Do reserves at Bank of Canada count as money?

I read the following three statements concerning M1 and M2 in Canada: a) "M1 consists of currency held outside the banks and chequable deposits of individuals and businesses." b) "M1 does not ...
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1answer
29 views

Why is investment included in GDP?

Why is real investment included in GDP? I thought GDP is only supposed to measure final goods produced? I thought capital is an intermediate good but I guess I am wrong. An intermediate good is sold ...
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Moral Hazard and Covid19 stimulus - situation, and possible alternatives [closed]

Premises: The stimulus package agreed today includes about 1500USD one off helicopter drop payment to each US citizen, (to a total of about 0.5 trillion usd? ) The Covid19 pandemic will cause peak ...
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Question About Consumer Price Index (CPI)

So my question is regarding how a change in consumer buying behavior affects the CPI. Say for example, that in times of crisis people tend to buy their goods from shops with cheaper prices than the ...
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1answer
69 views

Prove that a preference is linear

Given the following two conditions: $x\succ y$ implies $x+a\succsim y+a$, And, $x\prec y$ implies $x+a\precsim y+a$ We want to prove that $\succsim$ is a linear preference. One of the ...
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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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1answer
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FDI - Foreign Direct Investment

If in the sector foreign direct investments (FDI) are not stable, for instance, increasing dramatically in one year, decreasing next year. fluctuation continues over ten years, what FDI can say about ...
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Are typical macro DSGE (RBC or New Keynesian DSGE) models linear, non-linear, or log (linearized)?

In Carl Hommes 2015 book on Expectations, it seems he considers DSGE models (being it either RBC DSGE or New Keynesian DSGE) to be linear, or (log)linearized models, on page 3 of the introduction. He ...
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US Pandemic Stimulus [closed]

What is the limit of money available to the US federal government for pandemic related economic stimulus? If economic shutdown continues until July (as many perfect) can the government keep ...
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1answer
78 views

Why do prices go up when the central bank increases money supply?

From my understanding, when the money supply curve shifts to the right, interest rates go down, it follows that the price level decreases and the prices should go down? Thanks in advance.
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Deriving the Euler Equation

I want to derive the Euler Equation for the following: $$max \sum\limits_{t=0}^{T} = \beta^{t}U(C_t)$$ $$s.t. C_t+K_{t+1} \leq f(K_t) , t=0,1,2,...,T-1$$ $$-K_{T+1} \leq 0$$ I'm a bit confused ...
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2answers
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Real wages fluctuation as per classical economics

I have just started studying Macroeconomics and have noticed that as per the Classical economics, the real wage level will always remain same because any change in price level in the market is ...
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1answer
16 views

How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
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1answer
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What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important?

What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important? Is a non-linear model inherently less stable than a linear model? Why?
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Why would the price of goods rise up after increased consumption due to the outbreak?

On the wake of the COVID-19 outbreak, consumption of some goods will increase. But, my question is why so? My understanding is that, since aggregate demand for these goods has increased, supply can'...
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1answer
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Beginner wanting to learn about economics/finance to explore career options?

I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
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Does the Federal Reserve buy and sell stocks?

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?
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31 views

How to calculate the maximum willingness to pay? (Reservation price)

I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help. Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have ...
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7 views

Find yield rate (bid-ask spread)

On March 2, a Treasury bill expiring on April 20 had a bid discount of 5.86, and an ask discount of 5.80. Calculate the best estimate of the risk-free rate to be used in valuing options with the Black ...
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1answer
23 views

Negative long term effects of wage cap, especially on purpose of money?

It can be figured that a wage cap could have some noticeable short term effects - mainly, those who are higher paid will not receive as much money anymore, meaning less spending by the richest in the ...
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1answer
12k 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 + ...
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Why do profit margins fall in recessions [closed]

Profits are the difference between input and output prices. Input prices should fall faster if investment demand causes recessions. So tell me why profits fall
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Why dont capitalists use demand side economics [closed]

An asset manager with trillions could buy up a small economy like Singapore or Nigeria and stimulate it for a 300% multiplier if its in a recession. What stops capitalists from using demand side ...
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48 views

Solving for value function (non-Bellman)

I am trying to build a model and am having trouble getting a closed form solution for this value function: $$V(h_{t})=\max\limits_{{k_{t+1},\tau_{t},l_{2},I}} ln[w(h_{t})[1-l_{2}-\alpha I]-k_{t+1}-\...
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Real Exchange Rate and PPP

I'm struggling to answer this question. *Consider the real exchange rate. Suppose that the nominal exchange rate is 30, which is 10% lower than the level predicted by the absolute PPP. Answer how much ...
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2answers
10k views

Why does the real wage = W/P?

Im reading about labour markets, and the notes mention that the real wage 'w' = W/P, where W = the nominal wage, and P = the price level. Could someone please use some 'W' and 'P' as an example to ...
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1answer
23 views

How to calculate velocity of money when some people make long-term savings?

Bob gets paid every month and lives paycheck-to-paycheck, so for Bob's money velocity is 12 (assuming that there is nobody else in the economy). Al gets paid every two weeks and lives paycheck-to-...
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Log-linear version of current account equation

I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
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28 views

Forecasting integrated variables in a macroeconomic setting

I am trying to measure the effects of restrictions on immigration to a specific country on both real estate rental indices and real estate property price indices during the next 3 to 5 years. As a ...
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18 views

What happens to Interest rate if the money supply is fixed?

With the increase in Money supply, the nominal interest rate tends to increase. But what happens if the supply of money is fixed? What happens to the Interest Rate?
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1answer
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Debt-to-GDP ratio in connection to inflation

On this segment of the Tucker Carlson show, interviewing Robert Hockett, as an advisor to Rep. Octavio-Cortez on the proposed Green New Deal, the following interchange ensues: Tucker: "On the low ...
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1answer
50 views

How does an increase in the minimum reserve requirement affect the monetary base?

Monetary base is defined as currency+currency held by banks+deposits of banks at central bank. We assume that the current reserve is below the minimum reserve requirement. Which component of monetary ...
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Fed vs Treasury: 2008

Re-visiting the issue of the Troubled Assets Relief Programme (https://www.thebalance.com/tarp-bailout-program-3305895), both the Treasury and the Federal Reserve had a role to play in the "bailout". ...
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4answers
208 views

What's the use of '% to GDP' type of variables?

In my study I will look for the relationship between the Gini coefficient and trade, FDI and other variables. However, as I was regressing it... the result turn out to be insignificant. My data that I ...
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Multiplier and slope of Aggregate Expenditure

I have question I can't wrap my head around. Here's the question ...
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2answers
77 views

Can central bank interest rate hikes lead to a price gain in equities?

I ran an empirical analysis on recent interest rate changes of European central banks on Swiss equity prices and found statistically significant results. A 1 percentage point increase in interest ...
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After a permanent shock what would happen to the interest rates?

If there was a permanent negative population shock that reduced the population of the young by x. What would happen to interest rates under an OLG model?
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Are there automatic stabilizers that react with contraction to a stagflation?

So far I know only two automatic stabilizers, namely "progressive tax system" and "unemployment benefits". Both of them would react expansionary to stagflation. During stagflation incomes of people ...
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Export is high sensitive to external income. How can be this explained?

I am estimating an export equation, where dependent variable is export and independent variables are exchange rates, external income and other controls. Each coefficient is an elasticity. The results ...

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