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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1answer
20 views

Meaning of UK Employment Change Index - 3 Months Average

I am trying to understand the meaning of an economic index which is measured in the following way: The value for month n is determined by calculating the average of the last 3 months (n, n-1, n-2) ...
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0answers
8 views

Difference type of crowding out effect in economics

In macroeconomics I came across two type of crowding out. First, in IS LM model where in classical case, when LM curve is vertical increase in government expenditures have no increase in output i.e. ...
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+50

If Trump's economic policies are destructive, why is the US economy so healthy?

One doesn't have to look very hard to find suggestions that Trump's economic policies are damaging to the US economy. Example, example, example, example. In fact I barely recall reading any articles ...
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2answers
24 views

elasticity of income if price changes by 10 percent

Arista always spends 10 % of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is ...
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0answers
25 views

capital vs. labor allocaton

How does the balance between resorces alllocated to capital vs. labor impact GDP growth; if there is a relationship is it linear. what are the consequences to gdp growth of excess capital (current ...
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15 views

Total factor productivity persistence

Would it make a difference whether a decrease in total factor productivity z on the labor, goods, and money market is persistent? (That is, whether decreased productivity today also is predictive of ...
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3answers
230 views

Why solving the model for a benevolent social planner gives an efficient allocation?

Probably this question is really dumb - and I'm sorry if it is - but why solving the model for a benevolent social planner, gives an efficient allocation? What's the criteria for this efficiency? I'...
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4answers
901 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. ...
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0answers
65 views

What is Economic Interpretation of three nonlinear equations?

I have the following nonlinear system $w$ is wealth $c$ is consumption $r(w)$ is gross return on wealth $a,b, d$ are parameters which are strictly positive and fixed. $$\dot{w} =r(w)w-c$$ $$\...
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32 views

Examples of textbook definitions of transaction costs, for a non-econ student

I'm not an econ major, neither am I taking it as a minor, however seemingly out of nowhere economics has jumped into my CS class when talking about the role of IT in reducing transaction costs of ...
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1answer
280 views

Log linearization of the technology dynamic

I am still dealing with DSGE models and with log-linearization of characteristic equations of the model. The one that creates me more doubts is the technology shock, that is usually modeled as an AR(1)...
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0answers
16 views

Strategic Complementarities and Multiplicity

Consider a coordination game, in which actions taken by players are strategic complements. Moreover, assume that actions are strong strategic complements, in that the slope of the best response ...
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1answer
70 views

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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14 views

Estimate Markov process for incomplete market model

Let's say I have an economy in which the agent's budget constraint is: $c_t + k_{t+1} = (1+r-\delta)k_t+w_t\varepsilon_t$ Where $\varepsilon$ follows a Markov process with 2 states. I now want to ...
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1answer
62 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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1answer
48 views

Solving Euler Equation for standard DSGE Models

I am studying a rather standard DSGE Model with a standard Utility function $U = f(c_t, n_t, M_t)$ subject to a budget constraint. Now, tosolve the intertemporal optimization problem I have, or ...
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1answer
47 views

Is a 6% wealth tax a sustainable source of income?

Elizabeth Warren is planning to pay for various things with a 6% wealth tax on those with fortunes in excess of $1B USD. Now, right or wrong, this seems to be an awfully big annual scoop from a ...
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Labor Economy Question [closed]

Assume skilled TRNC citizens have a relatively easy access to the job markets in UK, EU, Australia and Canada, while the access of unskilled TRNC citizens to those markets is more limited and wages in ...
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29 views

Understanding a Keynesian point of view

The statement is - Inflation is caused by independant cost push factors and causes an increase in money supply .This is from the Keynesian school of thought.How would cost push factors ,say an ...
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1answer
13 views

Relation between foreign currency reserve and exchange rate and others

What is the relationship between foreign currency reserve(USD) of a country with it's exchange rate (against USD), and also with export and import strength ? And if it's too complicated to explain, ...
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11 views

calculating quarterly rates from

What is the "normal" way to calculate quarterly rates OR Prices. E.g. calculate the quarterly Oil Price, if I have the monthly data? I suppose simply taking the average of the three months isn't the ...
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0answers
13 views

Interest rate in the Ramsay-Cass-Koopmans model in a closed economy

I am struggling to understand the optimal choices of firms in the Ramsey-Cass-Koopmans model. Specifically, everywhere I see there is the following optimality condition for the interest rate, $r_{t}$, ...
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1answer
19 views

Velocity of M1 versus M2 money

According to Pablo Kurlat's textbook on Macroeconomics, the graph of Ch 13 compares the velocity of M1 and M2 over the years. I don't understand why M1 velocity exceeds M2 even though M2 includes more ...
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0answers
26 views

Analyse the influence of interior demand and trade on exports

I would like to have a primer on how the current slowdown of the German economy is affecting its partners, for instance France, Spain and Italy. More specifically, if it goes mainly through Germany's ...
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1answer
43 views

Change in inventory

Inventory change=last period's ending inventory- the current period's ending inventory. Change in inventory= production of the firm during the year- sale of the firm during the year No doubt in (1) ...
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3answers
99 views

Why would microeconomics be considered more “objective” than macroeconomics?

I can imagine the following reasons for this: conflation of positive vs normative economics in macro micro phenomenon is less complex (or smaller): thus easier to create reliable models for Thanks
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29 views

Deflation and Wealth Inequality

I've just seen an article where the author states that deflation has the possibility of reducing wealth inequality. His rationale is as follows: When deflation occurs, the prices of assets falls (he ...
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0answers
13 views

Why is the state variable in Brock-Mirman model bounded above?

as a beginner in macro, I'm trying to understand the Brock-Mirman model for one of my assignments and I am told (in the assignment) that there is a $k^*$ such that k is bounded. From the production ...
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16 views

Why was reform of Chinese State owned enterprises needed? [closed]

Why was reform of Chinese SOE needed in the mid-1990s? And how did the government go about implementing these reforms? I've read a bunch of texts on this stuff, but a high-level explanation would put ...
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16 views

calculate magnitude of a recession

I'm doing an exercise from Blanchard Macroeconomics where I'm, apart from other things, asked to calculate the severity of recessions in the US since 1960. The data on the webpage that's referenced is ...
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10 views

Where to find series of capital-output ratio for the US?

While the capital-output ratio is widely used in Macroeconomics as a target in calibration, it is usually just set to be equal to 3, without specifying the data source nor the methodology used to ...
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0answers
19 views

Would households rather live in a world with or without the unemployment insurance?

Would households rather live in a world with or without the unemployment insurance? What is a good example of world in which unemployment insurance is seen as a benefit, and not a hindrance?
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2answers
62 views

The relationship between profit and wages

It seems obvious that an individual company increases their profits when they reduce wages or increase automation or some such. But if wages fell universally because of this, wouldn't that decrease ...
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0answers
18 views

Effect of Agricultural products on GDP/capita

What is the best way to regress this effect. I would like to show the effect of the production of different agricultural products (Rice, maize, wheat etc..) have on the gdp of a country (India in this ...
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2answers
66 views

Question on Central bank loss function interpretation

How do you interpret this central bank’s loss function: $$L(\hat x, \pi)=\alpha \hat{x}^2+(\pi-\pi^T)^2$$ where $\alpha >0$ and $\hat x$ is output gap. Phillips curve is $\pi = \theta \hat{x}+\...
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0answers
25 views

Why would expanding fiat paper issue lead to decreased exports?

I'm reading "A History of Money and Banking in the United States" by Murray Rothbard, and I'm having trouble understanding this one piece of history. Basically, the Massachusetts government issues ...
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9 views

Overlapping Generations Model Pension System Question

Part 1 Pension System OLG Model with pension system: Each individual lives up to two periods. The surviving probability at period 2 is p. At period 1, the young household consumes c1, saves s1, and ...
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Measuring economic growth in GDP (in USD) vs Real GDP (domestic currency)

I've noticed that a lot of data online seems to measure a non-US country in USD. This seems odd to me, because doesn't that mean that US fiscal/monetary policies, politics, and economics would affect ...
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1answer
71 views

Central bank loss function (I did a solution, but it doesn’t totally make sense I guess)

I have question on central bank loss function. We know that the central bank loss function is $$L(\pi, \bar{Y})= (\pi- \pi^e)^2+\beta \bar {Y}^2$$ And we know that fisher equation is $$i=r+\pi^e$$...
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0answers
15 views

Numerical Solution Using Excel about optimal consumption of households

I'm not sure how to solve this problem. I'm given the discount factor, interest rate, probability of high income shock, and various income shock sizes that I need to use to compute optimal consumption....
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17 views

What insights can be gleaned from examining inflation spreads?

I was reading through some econ articles and there was much discussion on various measures of inflation. Though I'm not narrowing the scope to this article, I'll include the excerpt here for context: ...
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3answers
121 views

Bank Runs During the 1930s

Why were there numerous banks run right after the stock market crash of 1929? Why would a bank fail because the stock market crashes?
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1answer
46 views

Are there economic models that predict (only) a medium/long-term negative effect of protectionism?

Going by some ECB models/estimates from last year, protectionism would result in negative consequences pretty fast, e.g. For illustration, I will use the results of simulations carried out by ECB ...
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8 views

Query regarding derivation of aggregate demand curve

What is the difference between AD curve derive from is-lm model and quantity theory of money.
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1answer
21 views

Percentage/proportion of published papers with DSGE models

I remember reading a few years back an article that showed an interesting graphic with the percentage/proportion of published papers with DSGE models across time. I've tried searching, but I get so ...
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23 views

Balanced Growth Path Calculation

Consider an extension of Alesina - Rodrik paper 'Distributive politics and economic growth' (1994). Instead of wealth taxation, impose a labor income taxation with a slight change in the model ...
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0answers
41 views

What's the advantage of DSGE relative to BVARs?

DSGE models and BVARs are commonly used in academia and policy circles. They generate different performances (e.g., in forecasting) and perhaps serve different purposes. Notwithstanding, they have a ...
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1answer
43 views

Does migration exacerbate (albeit delay) the problem of aging, economically-inactive populations in Western societies?

As a layman, I've always understood that there is a general consensus amongst economists that "immigration is economically beneficial" to rich Western countries (like Britain) who have aging ...
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24 views

Profits and Aggregate Supply

I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to ...
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1answer
19 views

Why does the bond market induce efficient allocation of capital?

Going from this quote by Bryan Collins of Fidelity on China's economy: One of the nice things we see from the development of a domestic bond market is that it starts the process of pricing ...