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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Current Account and FX valuation
I was reading somewhere that under normal circumstances the FX rate of current account surplus countries tends to underperform and that of current account deficit countries to outperform. Can you ...
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Adjusting for inflation (is it possible that real $ exceed nominal terms)
I have adjusted the following data to inflation, and I am confused as my real figures are higher than my nominal terms, but I always assumed that adjusted for inflation figures would be lower (i.e. ...
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How to set up the Hamiltonian for this utility maximization problem?
Consider a representative household who accumulates capitals, earns labour and capital incomes, consumes part of its incomes, buys bonds and pays taxes.
The household maximizes its lifetime utility
$$ ...
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Are there any general rules that can be used to assess the consequences of a significant minimum wage increase in a country's economy?
Quite recently the EU Parliament discussed upon a new draft EU law that will ensure a minimum level of wage protection in all member states.
The minimum relative to average wages of full-time workers ...
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Godley-Lavoie private bank model
Good evening everyone !
I'm currently reading Godley and Lavoie Monetary economics. It's really an awesome book, and I'm at the 7th chapter where they introduce private bank money. The model is very ...
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Recursive competitive equilibrium with uncertainty
Consumer's preference: $E_0 =\sum_{t=0}^{\infty}\beta^t u(c_t)$
Markov transition matrix for labor: $\Gamma=\begin{pmatrix}\gamma_{ll}&\gamma_{lh}\\ \gamma_{hl}&\gamma_{hh} \end{pmatrix}$
In ...
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Should governments print money while the currency gets stronger
In a given situation where a local currency becomes very strong compared to other major currencies (like the USD, EUR, etc...), should the government / central bank leverage the opportunity to print ...
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Why does absolute price inflation depend on interest rate while relative price inflation does not?
This is a follow-up of my previous question: How come there is inflation in a model with no money? I have answered my own question with an example.
To briefly recap the example, consider a closed ...
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Venezuela Hyperinflation in 2014 on an IS LM FX model
In 2014 Venezuela began experiencing some of the worst hyperinflation. I wanted to know how this situation would be represented on a IS LM FX model, and the consequences of the hyperinflation.
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What causes rate transmission to be slow?
A recent quote from David Rosenburg on rate hike expectations reads:
Remember, everything the Fed does in a moment of time has a peak
impact on the economy 12 to 18 months later. Thus, raising rates ...
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The influence of an increase in ATM's on the demand for central bank money
This is a question posed in Blanchard's book on Macroeconomics.
The question is simple. Consider an economy with a central bank (CB) and private banks. The demand for CB money is then determined by ...
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How come there is inflation in a model with no money?
I'm watching the video lectures of Financial Theory (ECON 251) by John Geanakoplos, Yale University. In Lesson 5, Chapter 4 at 33:41, Geanakoplos defined inflation as the ratio of prices between two ...
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Help with a (simple) log-linearisation
As a solution to an economic model, I end up with the following equation:
$$L=\frac{\alpha f^{\epsilon}s\left [ 1-Ak(1-\alpha+\alpha f^{\epsilon}s)^{\frac{1}{\epsilon}} f^{-1} s^\frac {-1}{\epsilon}\...
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1answer
37 views
Which model of capital accumulation do macroeconomists prefer, renting model or investing model?
Consider a closed economy with perfect competition, no government and no fiat money. Consumer goods are aggregated as a single type of goods and prices are measured in units of goods. For such an ...
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1answer
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What is the meaning of lagrange multiplier (especially in ramsey problem)
Consider lagrange function for ramsey problem:
$L=E_0 \sum_{t=0}^{\infty} \beta^t \{u(c,l)+\gamma_t (s^t)[E_0 \sum_{j=0}^{\infty} \beta^j u_c (s^{t+j}) z(s^{t+j}) -u_c (s^t) b_t(s^{t+1})] \}$
where $[...
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2answers
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What is the intuition behind Expected Utility Theorem?
I am referring to the definition in Proposition 6.B.3 on Page 176 of Mas Colell. I follow the formal proof and the application of the Independence axiom at various steps (mathematical application of ...
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Volatility indexes
I want to use a volatility index as a measure of economic policy uncertainty. The index that I want to use is CBOE Volatility Index: VIX, but I don't know if I only can use this for US or if I can use ...
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1answer
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Wages are lower than 30 years ago in Italy, why?
Recently I've seen some statistics about wage growth in the European Union in the last 30 years and surprisingly, Italy is the only country with a negative value.
So, what is the root of this problem? ...
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1answer
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Does real wages have to increase for an economy to function from a mechanical point of view
Ive been trying to figure out why real wages should increase. If one can still buy the same stuff one could 20 years ago, isn't that good enough?
Or does this necessarily imply that one has not taken ...
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2answers
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Would it even be possible for m2 to remain stable under positive interest rates?
Let's say bank A has 1 of assets and 10% reserve requirements. It lends to bank B 9 Then they lend back and forth so they both have 50 of assets and liabilities (or whatever they can).
Then those ...
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1answer
48 views
substitution effect
when ı study about link between leisure time and gdp my lecturer said that when people gdp as rise people want to work hard and he say that it is substitution effect. Also when ı research the ...
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1answer
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Is this really a valid description of AS&AD after lockdown?
I understand that in the short run AS decreased (supply chains) and AD increased (stimulus, post-lockdown behaviour). But what's up with the lines in the long-run?
Also is this even a valid way of ...
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2answers
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Economic ignoramus question: if inflation is not caused by excess money but by supply constraints, why raise interest rates?
if inflation is not caused by excess money but by supply constraints, why raise interest rates? In fact, if higher interest rates suppress investment which would otherwise increase production capacity,...
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Does Okun's law work?
When we consider the Okun's law do we consider the U3 unemployment rate or the U6 unemployment rate or do we assume both? Assuming that we consider the U3 unemployment rate what are the challenges ...
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1answer
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How would inflation in the U.S. affect dolarized countries
Today I was reading about climbing inflation in the United States, so it got me wondering how would that affect (if at all) an small economy with the U.S dollar as its official currency.
As a bit of ...
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Unemployment forecasting model specification
I am building a model to forecast unemployment using GDP, the CPI index and the industrial production index (INDPRO) as covariates. Since I am looking to use stationary time series, I gathered the ...
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1answer
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Why did Germany not suffer from Great Inflation in the 1970s/80s?
Comparing the inflation rate of some of the industrial countries around 1975 (Great Inflation) in between the two oil shocks of 1973 and 1979/80, it seems odd that most countries' inflation rate was ...
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1answer
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Endowment economy
Consider an economy populated by two types of infinitely lived consumers, odd and even. There is mass one of each type of consumer. There is a single good in the economy. The economy starts at $t = 0$....
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1answer
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Problem with the definition of external debt
This is how external debt is explained in wikipedia:
"In public finance, external debt (or foreign debt) is the component of the total government debt which is owed to foreign creditors; its ...
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1answer
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What would the theoretical ramifications of a mass sell-off of United States bonds be?
If a sovereign nation or nations were to sell off large amounts (say 30%) of United States bonds, what effects would it have on the United States' economy and debt situation? I am guessing that a mass ...
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How to measure NDP?
NDP = GDP - capital depreciation
I tried to understand how to measure NDP but above identity doesn't seem to explain how to do it.
How to measure NDP, can anyone give me some explanation with a ...
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1answer
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What are good (i.e. non-random walk) time series to perform forecasting on?
I have developed a recurrent neural network (RNN) model for time-series forecasting. I now want to test its performance against more standard statistical/econometric models such as ARIMA or VAR. The ...
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How can a country have both of its current account and financial account negative?
I was doing a research on France history record of its balance of payments. I found france was having current account deficit through out the past 13 years (since 2007). At the same time period, ...
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1answer
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Is there any economical rational for a government to maintain low property taxes and rather high work-related taxes?
I have recently heard an analyst arguing that where I live (Romania) we have very low property taxes (0.08% to 0.20% for residential buildings), but rather high work-related taxes.
This was presented ...
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HANK model lecture notes + code
Can someone recommand me good lecture notes to understand macroeconomic heterogenous agent models such as HANK models (not TANK models, I know how them). Also if you know where I could find some codes ...
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What is the difference between seperation, quiting and layoffs? [migrated]
Is seperation considered to be a measure of layoffs and quiting from firm's perspective? Please let me know
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1answer
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Why is there such a big difference of purchasing power toward Coca-Cola between Euro in France and USD in USA, comparing to Big-Mac?
I have an assignment that requires me to pick an item and use it to create my own price level index, similar to Big-Mac index.
In March 2021, the price of 0.5 litre Coca-Cola in France was 0.97 Euro ...
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Tauchen Hussey Process in Words
I've encountered the Tauchen-Hussey Process for discretizing an AR(1) a few times in homework, but never with an in-depth explanation as to what it actually does or how it works ... just "here's ...
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What are claims on a central government?
I downloaded some data from the World Bank's World Development Indicators database.
I found a time series called Claims on central government, etc (% of GDP) with code ...
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Measuring Aid dependency
I am writing a paper regarding foreign aid dependency, and I would like to classify countries as being aid dependent or independent. Is there any criteria in the literature that can be used to ...
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1answer
41 views
Is normative economic planning value-neutral or value-based?
I'm really confused with the meaning of the terms 'normative planning' and 'system planning'. Investopedia says "normative economics is subjective and value-based". On the other hand, many ...
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2answers
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A Simple Question about Labor Capital Ratios
I do not have much training in macroeconomics, so I want to know if this statement is accurate:
"A \$30M dollar decrease in lending to businesses leads to a $45M decrease in aggregate labor ...
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1answer
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The Simple Math of Aggregation on Idiosyncratic Shocks
I am reading some lecture notes on heterogenous agents and Negishi approach. The question I have is a very simple math problem under this background. The setting is following: (I omit the irrelevant ...
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1answer
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Finding the set of Pareto Optimal Allocations
I am asked to find the set of Pareto Optimal Allocations in an economy where there are two agents namely $1$ and $2$, with the following utility functions and endowments.
$$u_1({x_1}^1,{x_2}^2)= \beta ...
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1answer
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Question on notation
I need to write a couple of simple equations for a homework project. I wonder what the convention is with subscripts. I do not want to use Greek letters and keep it simple. I have a few variables such ...
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Quarterly GDP and government spending data sources
I am looking for quarterly government spending and GDP data between the years 2019 and 2020 for as many countries as possible. I am posting this question in hopes that someone will point me in the ...
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1answer
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No statistical significance of the TFP growth
I'm conducting an econometric analysis of the natural rate of interest in the euro-area countries using the following variables: as dependent variable I'm using the long term nominal interest rates (i....
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What is the appropriate interpretation of the impact of an aging demographic on the supply of credit?
In the case of Japan, one of the more prominent examples of an aging society, loan growth has slowed at what appears to be a consistent rate with its declining workforce.
However the US appears to be ...
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Historical classification of countries data
I am looking for historical classification of countries by year as industrialized, Less Developed, and Emerging Market Countries and/or any other classification. I have looked on the World Bank ...
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1answer
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Help to understand a Log-linearization and subsequent Differentiation with respect to time
I was reading the following paper:
https://www.jstor.org/stable/2999442?seq=1#metadata_info_tab_contents
At one point there are a couple of simple passages that however I did not fully understand.
In ...