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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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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. ...
WoodfordJr's user avatar
7 votes
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155 views

Small Open Economy Without Government

Suppose we have an economy with a representative consumer with the following utility function: $$U=\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$ There is no uncertainty and the household ...
Maybeline Lee's user avatar
5 votes
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113 views

Optimal level of consumption in discrete time model with quadratic preferences and infinite horizon

I am trying to derive an expression for the optimal level of consumption in the basic problem: $ max \hspace{1cm} U_t = E_t \left[\sum_{s=t}^{\infty} \beta^{s-t} \left( C_s - a\frac{Cs}{2}^2 \right) ...
Giorgetto's user avatar
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Controversy surrounding the Fiscal Theory of the Price Level (FTPL)

I recently started reading a draft of John Cochrane's book on the Fiscal Theory of the Price Level. In the preface he states that the "[...] theoretical controversies are over." However, ...
Joe's user avatar
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5 votes
0 answers
210 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 ...
FooBar's user avatar
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5 votes
1 answer
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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 ...
John Donn's user avatar
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Aggregation in macroeconomic model with expanding product varieties

The final good is produced by a competitive industry combining a set of intermediate products, $i ∈ [0, N_t ]$ , using a CES aggregator: \begin{equation} Y= \left( \int_{0}^{N_t} y(i)^{\frac{\sigma -1}...
John M.'s user avatar
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4 votes
0 answers
171 views

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 ...
BAL's user avatar
  • 457
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0 answers
56 views

Value function iteration with stochastic productivity's standard deviation

Hello I would like to know how would you discretize the AR(1) process of technology in a standart RBC model when there is stochastic productivity's standard deviation. Namely I have: Technology $Z_t$ ...
BAL's user avatar
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4 votes
0 answers
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Value function iteration with habit

I would like to know how I could write a value function when there are habits in preferences. I have the following equations: $$ u\left(C, t, H_{t}, L_{t}\right)=\frac{\left(C_{t} / H_{t}^{\kappa}\...
BAL's user avatar
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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 ...
John M. Riveros's user avatar
4 votes
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125 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 $$ \forall i: \lim_{x_i \to \infty} h(\mathbf{x}) = \infty. $$ ...
Giskard's user avatar
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4 votes
3 answers
230 views

Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
Setrotoxin11's user avatar
4 votes
0 answers
50 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 ...
MGwynne's user avatar
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1 answer
155 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 ...
user16175's user avatar
4 votes
0 answers
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 ...
simba's user avatar
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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 ...
FooBar's user avatar
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4 votes
1 answer
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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 ...
An old man in the sea.'s user avatar
3 votes
0 answers
59 views

Ramsey model and the steady state

Following Barro's book about the Ramsey Model, when we work with variables expressed in units per effective labor we end up with the following system of 2 differential equations \begin{equation} \frac{...
Maximilian's user avatar
3 votes
0 answers
44 views

Sustained growth in Ramsey model

It is known that in the classical Solow model that if we use CES production function instead of Cobb Douglas function, it is possible to have sustained growth if the substitutability is larger than 1. ...
邵嘉喻's user avatar
3 votes
0 answers
41 views

Labor augmenting technological progess and its relevance

Can you provide a proof showing why balanced growth requires technological change to be labor-augmenting in the neoclassical growth model?
Dimitru's user avatar
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some derivation in Alvarez and Jermann (2000)

(Alvarez and Jermann (2000)) For each $i \in I$ there is a constant $\xi_i$ such that for all $t, z^t$, $$|u(c_{i,t}(z^t))| \le \xi_i u'(c_{i,t}(z^t)) c_{i,t}(z^t).$$ $\cdots$. This condition holds if ...
shk910's user avatar
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Open Economy IS-LM with Perfect Capital Immobility

As a part of self-study for entrance exams I was trying to solve the following problem: The problem with this question is that I feel like the equation for $TB$ is incorrect, because we are given ...
mynameparv's user avatar
3 votes
0 answers
46 views

Dispersion of housing prices in Hsieh And Moretti (2018)

I have been reading 'Housing Constraints and Spatial Misallocation', by Moretti and Hsieh, AEJ Macro 2018, https://www.aeaweb.org/articles?id=10.1257/mac.20170388 In their equation (7), they derive a ...
Student's user avatar
  • 31
3 votes
0 answers
16 views

Is there good primer for distributional macroeconomics?

Distributional macroeconomics (for example; works of Ben Moll) seems to be more and more popular these days. Is there any good primer for student that wants to try to get into this new field? I am ...
Lorenzo Pozzi's user avatar
3 votes
0 answers
146 views

Mathematical Prerequisites for Recursive Macroeconomic Theory (Thomas J Sargent, Lars Ljungqvist)

I'm a math grad who is interested in learning more about economics for fun. Reading through RMT, I saw some interesting math (in chapter 2) around using "invariant functions" to determine ...
jrudd's user avatar
  • 155
3 votes
1 answer
111 views

Explain the definition of a primal shifter versus an input shifter parameters in the standard CES function

I have run into a CES function that seems to be very closer to standard but with a small disaggregation of the share parameter into two parameters (primal share) and (input shift). I am hoping someone ...
user42955's user avatar
3 votes
0 answers
188 views

Unit cost function for CES

You do not need to make computations, you can just tell me how to make the following derivation: I'm studying a paper where the unique final good of the economy is produced according to the following ...
John M.'s user avatar
  • 267
3 votes
0 answers
100 views

Solve Value Function Analytically

The context is the Schumpeterian growth model with incumbent innovation (see Aghion, Akcigit, Howitt 2014 Handbook of economic growth): the value function is $$ r V_{t}(n)-\dot{V}_{t}(n)=\max _{z_{i} \...
Alalalalaki's user avatar
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3 votes
0 answers
51 views

Neoclassical Growth Model with Technology Investment

I am reading Parente & Prescott 1994 JPE. This is just a typical neoclassical model with the extension of a global technology diffusion function and firm investment in technology. Firms have ...
Alalalalaki's user avatar
  • 2,496
3 votes
0 answers
47 views

Alternative ways of visualizing longitudinal macro data?

Problem: Visualizing longitudinal is challenging when the dataset has large number of panel members. A common ways to visualize such data is to either make a large set of small individual plots such ...
1muflon1's user avatar
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3 votes
0 answers
63 views

Calibration of labor market frictions parameters

I want to refer to the following paper A Three State Model of Worker Flows. My questions are regarding the calibration of parameters. First, I would appreciate any help when on p. 11 it says that $\...
Alex Ruiz's user avatar
  • 343
3 votes
0 answers
100 views

Deriving the New Keynesian Phillips Curve (NKPC)

I have a question regarding the NKPC. I would like to know if it is possible to derive the NKPC from a sticky prices model, without making assumptions regarding the production function firms face. I ...
Daniel José Aguilar's user avatar
3 votes
0 answers
36 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_{...
manifold's user avatar
  • 853
3 votes
0 answers
68 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 \...
Maybeline Lee's user avatar
3 votes
1 answer
115 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 ...
Arash Howaida's user avatar
3 votes
0 answers
422 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(...
Maybeline Lee's user avatar
3 votes
0 answers
1k views

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, ...
Polemos's user avatar
  • 31
3 votes
0 answers
94 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 ...
TomG's user avatar
  • 41
3 votes
2 answers
215 views

Is the money market model based on assumption of no interest rate targeting on the part of the central bank?

This is quote from Gregory Mankiw's macroeconomics text about mechanism of formation of the interest rate in the money market model: How does the interest rate get to this equilibrium of money supply ...
KarmaPeasant's user avatar
  • 1,135
3 votes
0 answers
31 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 ...
DoubtingThomas3005's user avatar
3 votes
0 answers
78 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 ...
Alex Ruiz's user avatar
  • 343
3 votes
0 answers
26 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 ...
Victor Le Pochat's user avatar
3 votes
0 answers
313 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 ...
chsk's user avatar
  • 315
3 votes
0 answers
94 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 ...
Energytopic's user avatar
3 votes
1 answer
229 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 ...
T. G.'s user avatar
  • 316
3 votes
0 answers
745 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 ...
b11bb's user avatar
  • 305
3 votes
0 answers
123 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? ...
emeryville's user avatar
  • 6,990
3 votes
0 answers
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 ...
Cort Ammon's user avatar
3 votes
0 answers
75 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,...
z.li's user avatar
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