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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7
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77 views

Causes of trade deficit: Multiple views

I am trying to understand the causes and macroeconomic implications of running a trade deficit in the United States, and I came across a few different views on this topic. I'd like to know if there ...
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75 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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1answer
246 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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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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168 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 ...
4
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34 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
50 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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3answers
1k views

Relationship between Real Interest Rate and Employment

The country of Kingsland is considering the introduction of a compulsory retirement saving scheme. Under this scheme all workers are required to save ten per cent of their annual wages and ...
4
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0answers
2k 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
350 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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50 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 ...
3
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0answers
36 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 ...
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37 views

Are there empirical studies that quantify shoe-leather or menu costs?

Two theoretical arguments why a high level of inflation is bad (e.g. for growth) are: shoe-leather cost: keeping lower money balances when inflation is high (implying more frequent trips to the bank/...
3
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1answer
86 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 ...
3
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374 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 ...
3
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0answers
86 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? ...
3
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2answers
762 views

Interest rate Effects on labour supply

I was analysing, free of specificities, the effects of an increase in the real interest rate on labour supply in a two period setting. The obvious effect on leisure is the intertemporal substitution ...
3
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0answers
56 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,...
3
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0answers
389 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 ...
3
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0answers
32 views

Cost of production plant

I'm struggling to find a macroeconomic index which embodies the cost to run an average production plan. My problem is that I wanted to divide the annual average cost per employee (which I already ...
3
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0answers
43 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 ...
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79 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 ...
3
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105 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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126 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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26 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 ...
3
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498 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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0answers
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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0answers
75 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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143 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 ...
3
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0answers
38 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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41 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
94 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 ...
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0answers
42 views

If an endogenous explanatory variable is serially correlated does it mean that its lags are also endogenous?

in panel data when examining economic growth determinants lags are often used to account for endogeneity of explanatory variables. However if the explanatory variable is serially correlated, does it ...
2
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0answers
35 views

Steady State in Korinek and Simsek (2014)

I was reading a paper by Korinek and Simsek (published in the AER in 2016). The version I cite is an IMF Working paper from 2014. The authors essentially describe an economy which has two types of ...
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90 views

Derivation of demand function

Hello. I'm graduate student in Japan. This time, what I want to ask is how to solve the profit maximization problem using the image production function and derive the demand function. This ...
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0answers
25 views

Effect of Import Tariff on Supply of Currency on Foreign Exchange Market

I'm struggling with this question below for my macroeconomics course. If Argentina were to impose a tariff on its imports, how will the supply of Argentina's currency and its exchange rate be ...
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0answers
28 views

Why is there a Lagrangian Multiplier in the Dynamic Programming Problem of the RBC model?

Suppose that the household faces the following problem: $\underset{ c_t , k_{t+1}, n_t } \max \mathbb{E}_0 \sum_{t=0}^{\infty} \beta^t \ln c_t + \ln (1 - n_t)$ subjected to $ k_{t+1} = A_t k_t ^{\...
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0answers
54 views

Relationship between Elasticity of substitution of sectoral outputs and elasticity of substitution of inputs

There are two sectors Y1 and Y2. Composite output is given by CES form - Each sector employs Capital and Labor in combination through Cobb-Douglas Production Technology. The paper mentions that ...
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0answers
10 views

How is the level of full employment in an economy determined?

Is this a statistical thing or...? It seems very abstract to me, haha!
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0answers
53 views

How is Aggregate Supply(Willing) equal to National Income(Actual)?

Acc. to definition of Aggregate Supply It is the total value of final goods and services that the producers are willing to supply in country . Definition of National Income It is the value of ...
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0answers
30 views

Effect of Modified Utility Function on Initial and End Values of Capital, Labor and Production

I am trying to model a transition path of an economy exposed to a permanent shock to government spending on dynare via matlab. We start with these model equations (standard dynare code format). <...
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0answers
44 views

How can the number of hairdressers in the UK be up 50% since 2010?

In this recent article, The Economist argues that one of the reasons behind the anaemic recent wage growth in Britain is that the recent job growth has been concentrated in lower-productivity jobs and ...
2
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0answers
282 views

Solow Model - criticism of Harrod model

I have started out reading seminal paper of Solow - Solow Growth model. It starts out with discussing weaknesses in Harrod Domar Model, a simple model of economic growth which featured prior to solow'...
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0answers
36 views

Finding savings in an Overlapping Generations model

I have not seen this question asked anywhere, so I'm posing it here in case anybody else (hopefully) can help me get to the answer. In a nutshell, my question is: how do we arrive at the saving ...
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0answers
53 views

Cleaning data for DSGE model estimation: An and Schorfheide (2007)

In Herbst and Schorfheide "Bayesian Estimation of DSGE Models", in the appendix named "Data Sources", they show several formulas relating the empirical data which should be used for the model. Here's ...
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0answers
42 views

What are the linearised equations for the flexible economy in Smets and Wouters (2007)?

To solve the Smets and Wouters (2007) model, we need the linearised equation for the economy when wages and prices are flexible (monetary policy rule depends on the potential output). However, in ...
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0answers
24 views

How to deal with potential output in the Sims (2002) framework?

In Sims(2002), the author explains how one solves a linear rational expectations model. $$\Gamma_0S_t=\Gamma_1S_{t-1}+C+\Psi z_t + \Pi \mu_t$$ The only thing exogenously defined in the $z_t$ ...
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0answers
28 views

Dornbush model - relationship between i and S

In the Dornbush model, when we separate short and long run equilibrium. This is what I apparently have understood: SR1: an increase in Money Supply ($M_s$) leads to a fall in domestic interest rates (...
2
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0answers
484 views

Meaning of Transversality Conditions in Ramsey Problem

I'm working on a Ramsey problem for taxation, and am a little confused on the meaning/intuition behind the transversality conditions below: $\lim_{T \to \infty} \lambda_T b_{T+1} = 0$ $\lim_{T \to ...
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0answers
125 views

How can the “Share of merchandise imports at current PPPs” be negative?

I'm looking at the Penn World Table 9.0 data, and find that the "Share of merchandise imports at current PPPs" (csh_m) can be negative. For example, ...