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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192 views

Testing Tobin's q theory predictions

I'm reading this great intermediate level macroeconomic book by Carlin and Soskice, and on page 31, when discussing the empirical studies testing the Tobin's q theory to explain the behaviour of ...
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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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1answer
72 views

What is the rate of new house construction in Auckland, New Zealand?

What is the rate of new house construction in Auckland, New Zealand, where the housing market seems to have gone to the roof? Assuming that the current high prices of Auckland houses are a result of ...
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3answers
130 views

Solow model reparations

I have the following task: At some moment of time (1953), the government of a country (Israel) signs an agreement with another country (West Germany) stipulating that West Germany would pay ...
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1answer
62 views

Economics and Stock Market/Bond Market

In this link, we can read "The revised reading of second-quarter gross domestic product growth beat analysts’ expectations triggering a stock-market rally and a bond selloff." Well, why can we assume ...
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how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth. I was reading through a textbook and saw that the devaluation of a nation's ...
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4answers
391 views

Autonomous or non-autonomous optimal control system?

I have a following system with endogeneous discounting. $c,k$ and $h(k)$ are consumption, capital and endogeneous discount function based on physical capital. (the properties of this function are not ...
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1answer
128 views

Substitution effect on investment due to tax credit

Suppose we are in an economy with only two kinds of investment, business investment and residential investment. Suppose also that government gives tax-credit on business investment. Will there be a ...
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1answer
72 views

Optimal Stopping

When we solve Bellman equations, I normally would think of the Blanchard Kahn technique. But in the case that I have an optimal stopping problem, or where the decision that the agent has to take is to ...
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2answers
1k views

When Does a Shift to the Right Happen in the Demand and Supply Curves Simultaneously?

If, for example, Health Canada issues a public statement that states eating pizza is good for your overall physical health, would this result in both a shift in the demand curve for pizza to the right,...
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417 views

Real option effect of uncertainty - irreversiblity vs fixed cost

There is a growing literature (e.g. Bloom, 2009) studying negative macroeconomic impacts of heightened uncertainty. One channel through which uncertainty can discourage economic activity, and ...
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3answers
1k views

Why is Indian rupee is stable against the USD even though most other currencies weakening?

The Indian Rupee (INR) seems fairly stable against the USD (1 USD = 62-64 INR) in the recent times even though most other currencies have weakened against USD, some by 20-30%. Apparently, INR is ...
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2answers
222 views

Why use empirical macroeconomic models when they are not policy invariant (Lucas Critique)?

With high probability this question is duplicate, and I tried to find one already in the community, but I was unsuccessful. According to the Lucas Critique, in its more general terms, the problem ...
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3answers
107 views

What oil price will minimise new resource extraction?

A higher oil price would increase incentives to develop new oil resource extraction, but it also increases the competitiveness of sustainable energy sources. Conversely, a low oil price might mean ...
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324 views

Causes of income inequality in the US

I read an article in BusinessWeek that talked about income inequality in the US. The article attributed the difference to the Intel chip that came in 1971. Since that time big hi-tech companies have ...
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1answer
40 views

Literature Request: how does the house quality distribution change endogenously over time?

Is there existing literature on how the distribution of housing quality changes with time? For example, literature saying "using 2000 as a baseline distribution $X$, the housing quality distribution ...
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1answer
767 views

Did the Marshall Plan cause Western Europe's economic expansion after WWII?

It is widely accepted, that the Marshall Plan had a major role in the economic recovery of Western Europe after the end of the Second World War. The reality is that the total economic support was less ...
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1answer
89 views

Computational Bayesian Statistics and Economics

What is there that links computational Bayesian statistics and Economics(preferably macro)? I'm looking for a primer or gentle introduction on the matter. It doesn't need to go into much detail. Any ...
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31 views

The coming US interest rates rise by the Fed. Will it affect the european bonds?

Recently, or maybe not so recently, there has been talk of the Fed going to enter in cycle of raising the interest rates. When interest rates are expected to be risen in the future, bonds with long-...
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1answer
115 views

Stock Valuation - Interest rates, Dividends, and Shares Repurchases

I'm reading a macro book (Blanchard's) and the way he values shares is by calculating the net present value of all dividends we expect to receive by owning some stock, discounted by the interest rates ...
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107 views

Two ways of calculating real GDP: do they produce the same result?

My professor gave us two formulas for GDP for 2012 in 2010 dollars: y = P1 (2010) * Q1 (2012) + P2 (2010) * Q2 (2012) ... And: ...
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1answer
2k views

A country borrowing from the rest of the world

Well I'm having a some difficulty in understanding completely what the following sentence means and I would like to be sure. «(...) a country running a trade deficit is buying more from the rest of ...
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4answers
14k views

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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1answer
6k views

Calculating the Net Domestic Product

This should be fairly simple but I think I am missing something here. Gross Investments: 46 Exports: 9 Disposable Income: 190 Personal Savings: 10 Purchases: 84 Net Foreign Factor ...
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1answer
1k views

Medium run conclusions from Okun's Law and Expectations-Augmented Philips Curve

In Blanchard's Macroeconomics, page 211, 5th edition, the author using the following three mathematical equalities Okun's law : $u_t-u_{t-1}=-\beta(g_{yt}-\bar{g_y})$, where $\bar{g_y}$ is defined as ...
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1answer
67 views

Econometric test for detecting change from trend stationary to stationary process

I am stuck with the following problem from research. Is there an econometric test which detects change from trend stationary to stationary process. I tried to search for this but the literature is ...
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2answers
696 views

Monetary policy takes medium run time to take effect. Why study it in short run?

Well I'm reading a book on the IS-LM model. At the end of the chapter, page 125 in my edition, the author presents one paper showing some graphs where the monetary policy (monetary contraction - ...
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1answer
892 views

How does the IS/LM model respond to organic GDP growth when the money supply is held constant?

If GDP increases (due to tech change/good investment), interest rates would move up along the LM curve and down along the IS curve, so what happens to the equilibrium? Do we assume GDP cannot grow ...
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112 views

How can Finance influence economic activity?

I'm not sure how to put it. I'm currently reading Blanchard's Macroeconomics. In a chapter, he explains how for example an unexpected shift in monetary policy, or in consumption or in fiscal policy, ...
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1answer
79 views

Is $y$ always output per person in DSGE/RBC models?

As title says, is $y$ output per person in DSGE/RBC model? If so, why did macroeconomics decide not using Solow/Cobb-Douglas style of using full labor to characterize economy? Model reference: http://...
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3answers
1k views

Numerical analysis in economics

Recently, I have become interested in numerical analysis withinin macroeconomics. In particular, I have been trying to learn algorithms such as "backwards iteration", the "shooting method" etc, in ...
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1answer
156 views

Stock Markets and Monetary Policies

Assuming we're dealing with rational investors, the stock price is equal to the present value of all future dividends(supposedly discounting at the nominal or real interest rates should give the same ...
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2answers
138 views

GMM Estimation of a parameter from Intratemporal Euler of capital constraints

I'm trying to estimate $\lambda$ from this intratemporal Euler equation: $\left[ \dfrac{C_t^{-\sigma}}{C_t^{*-\sigma}} \dfrac{P_t}{S_t P_t^*} \right]^{\lambda} \left[ \dfrac{\bar{P_t} Y_t - \Delta (...
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2answers
2k views

What is the real reason for china's stock market crash (August 2015)?

I have read douzons of explanations and they all basically claim the following: China's stock market continued to boom despite the country's increasingly gloomy economic outlook, and this ...
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1answer
128 views

What is meant by credit-based investment?

My knowledge of economics is very small so I would be grateful if anyone could answer this question in the style of 'economics for dummies'! What is meant by the term 'credit-based investment' or '...
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2answers
64 views

A simple question on a relationship between output growth rate and unemployment rate

I'm reading Blanchard's Macroeconomics, and on page 206 of the 5th edition, he writes: «Let $u_t$ denote the unemployment rate in year t, and $u_{t-1}$ the unemployment rate in year t-1, and $g_{yt}$ ...
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1answer
225 views

Intertemporal Model Macroeconomics

Basically, I have the full intertemporal model (the two period model) with the consumer, firm, and government, complete with the investment. And there is this question: Determine an equilibrium path ...
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3answers
611 views

Why must there be an equilibrium in the money market?

Probably this question is a bit(or very) stupid. I'm self-teaching by reading a book on macro, and the author states that in the Money Market, when the output increases the demand for money also ...
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3answers
323 views

Why does the IMF push for austerity?

Are there any countries that applied austerity measures and had a positive outcome that was attributed to it? Why do institutions like the IMF often encourage or require it?
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1answer
633 views

Central Bank liabilities and assets - Money and Bonds

I'm reading a book on macroeconomics, and on a chapter on the money market, when explaining how the central banks(CB) determine the interest rate, there is a balance sheet for the CB. In it, under the ...
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1answer
724 views

Real world example of using difference quotient vs. derivative

When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable? Real world examples seem to be lacking in textbooks on ...
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2answers
960 views

Why is modest inflation a good thing? [duplicate]

I have been reading a BBC news article about inflation in the UK, which is saying that inflation has recently become negative (http://www.bbc.co.uk/news/business-33147660). The article suggests that ...
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1answer
247 views

Why are the 10 year German bunds and 10 year US treasury yield highly correlated?

And when the ECB started QE this year, the 10 year bunds rate naturally plummetted, but so did the 10 year US treasury rate. What fundamental reason could cause the US rate to drop in synchrony?
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3answers
467 views

Question on real exchange rate

If the Phillipine peso falls in value against the USD by 5% in a year, but the domestic inflation rate in the Phillipines is 10%, compared to 2% in the USA, the nominal exchange rate has fallen (by 5%)...
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1answer
12k views

What does it mean by 'intensive form'?

I encountered this phrase while reading up on growth models - that is to work with a function in intensive form. What does it mean when a function is in intensive form? Thanks!
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2answers
138 views

If billionaires stopped spending what would the economic effect be?

For example they always invest every available wealth they have (or they burn money for cooking or dump money into the sea to make artificial islands)? In some sense that money is not returned to the ...
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1answer
84 views

Calculating the cost of a year without land-tilling

The motivation to this question is the Biblical commandment of Sabbatical year, in which the land should be allowed to rest and should not be cultivated. I am trying to estimate how much would it cost ...
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1answer
58 views

What is a Stock exchange? [closed]

What is a stock exchange, I understand that it is a place where one buys and sells shares but I would like to know in more detail.
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1answer
812 views

static/dynamic optimization

The interesting paper Calvo and Obstfeld (1988) uses two-stage optimization on an OLG model which then reduces to a standard representative agent framework. First stage optimization consists on a ...
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1answer
23 views

EIB - losses on Greek bonds

The EIB is holding large quantities of Greek bonds. if Greece would default on these bonds, how would these (paper) losses be felt by individual tax payers in the other EU countries? Would this be ...