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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4
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1answer
206 views

Do countries invest in the country's own stock market?

For example can the government of the UK invest in some company with shares in the FTSE 100? Or can Russia take the opportunity now that the shares of oil companies are low to buy them?
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Measuring Integrating Capital Market

There are several methods measuring integration capital market. What best to measure for integration capital market?
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1answer
7k views

A general drought in the world, raises the total income that farmers receive?

I need to write 6-7 lines explaining why is the following statement true: ...
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Why in most macro models technology is labor-augmenting?

Take Romer's advanced macro book as reference. In it the Solow model,the Ramsey model and the Diamond OLG all contain the fundamental $A_t$ variable representing technological progress. In all these ...
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1answer
403 views

Liquidity trap and consumers' reaction to an increase in money supply

I've understood that when the nominal interest rate reaches the zero lower bound there is nothing that the monetary policy can do to increase the output level of a certain economy. Because $i=0$, no ...
2
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435 views

Solving an OLG model, value function iteration vs. projection (chebyshev polynomial)

I can't decide between using value function iteration or projection on chebyshev polynomials. I'm inclined to use projection, however I need to compute (for welfare analysis) the value of the value ...
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1answer
92 views

For linear quadratic approximation of RBC model, why does matrix $P$ of value function $V = F^TPF$ has to be negative semi-definite matrix?

In http://www.compmacro.com/makoto/note/note_rbc_lq.pdf page 5, it is said that for value function $V = F^TPF$ (Bellman equation) $P$ has to be negative semi-definite matrix. Why does it have to be ...
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286 views

How is labor disutility modeled in Arrow-Debreu model?

In DSGE models, utility function contains labor disutility components. But I cannot not see how labor disutility is incorporated in Arrow-Debreu-Mackenzie model.
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1answer
52 views

Would it be correct to use exchange rates of the biggest trading partners to the dollar as an explanatory variable?

I'm trying to study the relationship of general macro factors and their effect on credit in the private sector. The country in question has a fixed exchange regime with the dollar, would it be ...
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156 views

Is special case of utility function in “Intertemporal Substitution in Macroeconomics” also a special case of a Ramsey growth model utility function?

So in RBC and Ramsey-derived utility function, the following is usually the form of utility: $$u(c,l) = c^{1-\sigma}(1 + \omega(l))$$ where $\omega(l)$ is arbitrary function of $l$, labor, that ...
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1answer
118 views

The USA debt and the individual investor

There is a lot of hype about the national debt of the USA being incredibly large, and I wonder if this has any implications about an individual investor? I understand that the risk of having a large ...
6
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1answer
138 views

why is labor $h_t$ often average working time percentage of non-sleeping time in RBC?

Cobb-Douglas production is often given by $Y=AK^{\alpha}L^{1-\alpha}$, and $L$ is often just labor. But in RBC model, I notice that labor $h_t$ is restricted to $[0,1]$, and interpreted as working-...
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125 views

Does RBC models pin down equilibrium output, amount of labor and capital without initial condition?

In ordinary equilibrium models, we can pin down equilibrium quantity by supply-demand functions. Is this the same in RBC models? Can we pin down equilibrium output and amount of labor and capital ...
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280 views

How did reducing the employment gender gap impact the US economy?

Premise In the United States, women have been replacing men in the workforce, or rather were from sometime prior to 1976 until the mid-90's. (The general upward trend is from the recent recession, ...
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3k views

Benefits of a weak national currency

I often hear that developing economies can benefit from a weak national currency. For example China as exporter deliberately makes its national currency weaker, so that it gains an advantage. Are ...
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4answers
5k views

Can a country survive and prosper without international trade or investment from overseas?

To what extent can a country be 100% independent from the rest of the world? Is there any country like that in the world? Maybe North Korea, but North Korea receives supports from China.
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3answers
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How does inflation impact the welfare of the economy?

When the government causes inflation through printing money, the individuals who saved their money in the bank are poorer. Is there a way to determine how different inflation rates impact the welfare ...
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1answer
176 views

Does Craigslist Reduce Unemployment?

If a substantial (though admittedly I have no idea how large) part of the natural rate of unemployment is caused by the job search, do more efficient means of communication create more efficient labor ...
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2answers
286 views

Can intermediate good producer's profit ever be zero in new keynesian model?

In monopolistic competition, firms are said to have zero long-run economic profit. This makes me wonder whether profits of intermediate goods producers in New Keynesian model ever be zero. For ...
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1answer
862 views

Barro 1977: Main Message

I used to read Barro 1977 as (1) Prices not moving in a long-term contract is not sufficient for these prices to be suboptimal. That is, there can be an optimal pricing sequence in a long-term ...
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1answer
61 views

Is $\lim_{t \rightarrow \infty} B_t = 0$ at equilibrium in classical monetary model, where $B_t$ represents bond holding?

At equilibrium of classical monetary model, does $\lim_{t \rightarrow \infty} B_t = 0$, where $B_t$ represents bond holding has to hold? I was wondering about this question because there is no ponzi ...
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3answers
438 views

How to solve a linear forward-looking equation $x_t = \beta E_t[x_{t+1}] + k$ where $\lim_{t \to \infty} x_t = 0$ and $0<\beta < 1$?

How does one solve a linear forward-looking equation $x_t = \beta E_t[x_{t+1}] + k$ where $\lim_{t \to \infty} x_t = 0$ and constant $k,\beta \in \mathbb{R}$, $0<\beta <1$?
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why is real wage divided by marginal product of labor often called real marginal cost?

As said in the title, why is real wage divided by marginal product of labor often called real marginal cost? In mathematical formula, $mc_t = (W_t/P_t)/MPN_t$ where $MPN_t$ refers to marginal product ...
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2answers
3k views

Gross value added and worker salary

I'm trying to figure out how the Gross value added is calculated. The first question that I have encountered is "Does the Gross value added of an activity includes workers salary?" If not, what is the ...
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1answer
188 views

What does one-sided polynomial on lag operator $L$ mean?

In some time series texts, there are some talks about one-sided polynomial on lag operator $L$. I tried looking up what this means, but I cannot find one. So what does one-sided polynomial on lag ...
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1answer
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Extensive Labor Margin and Full Insurance

Extensive margin models use Rogerson (1988) style lotteries in order to simplify the savings problem under non-full-insurance. However, one could still write down the model in that style but instead ...
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1answer
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Why is capital often not included in New Keynesian models? Is there a reason other than modeling difficulty?

In New Keynesian models, like the ones in Gali's simple New Keynesian model or even Mankiw-Reis NK model on sticky information, capital is often not included. Now people do say that there are ...
10
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1answer
350 views

Straub and Werning, 2014, on zero capital taxation

This is a test balloon to see whether these kinds of questions are appreciated/welcome on Econ.SE: I had a hard time grasping Straub and Werning (2014) (no paywall). I understand the general ...
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1answer
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In most New Keynesian models, can monetary shock affect technology shock also?

One simple New Keynesian model would be http://crei.cat/people/gali/pdf_files/monograph/slides-ch3.pdf but I do not restrict my question to this model only. Let us for now ignore the problem of ...
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205 views

Banking Regulatory Frameworks, between the 1973 collapse of Bretton Woods and the introduction of the Basel Accords in 1988?

Does anyone know of any work on banking system behaviour, and in particular the governing regulatory frameworks that applied between the 1973 collapse of the gold standard based Bretton Woods system ...
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With OPEC driving the prices of oil down, can American producers simply store oil produced at higher cost to sell later? [closed]

I have been wondering. With OPEC driving down the price of oil in order to stifle the growth of the American oil industry, what can we do about it? More specifically, why don't these oil producers ...
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Empirical estimates of CRRA and CARA utility

I am working on macroeconomic model and I need to calibrate it. I am looking primarily for a statistically-founded estimate for the coefficient of relative risk aversion in the CRRA utility function ...
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3answers
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Log-linearization of Euler equation with an expectation term

There are a few online resources available to help with log-linearization (e.g., here or here). However, log-linearization where an expectation is involved is a little tricky because the log can't ...
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0answers
57 views

ICAPM when assets' mean returns and variance-covariance matrix are not constant over time

The intertemporal capital asset pricing model (ICAPM), under the usual assumptions, produces a multifactor pricing model like the one described in this question. When and how would it be possible to ...
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1answer
1k views

Government expenditure multiplier in the new-Keynesian model?

Does a temporary increase in government expenditure increase output in the standard new-Keynesian DSGE model? Is it possible to draw any intuitive parallels between the impact of government ...
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3answers
923 views

What is the calculable effect of counterfeiting on an economy?

I'm curious whether one can numerically calculate the effect that counterfeiting has on an economy. As I understand it, counterfeiting essentially amounts to theft of the wealth of everybody holding ...
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1answer
229 views

Models for inflation prediction

I am looking for some statistical models that are accepted to best predict inflation rates. Anything that is more complicated than linear model will be appreciated. Or even recommend books that ...
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3answers
228 views

Growth Accounting

In growth accounting the production function is defined as follows: $$Y= AF(K,L) $$ That means output $Y$ is dependent upon capital $K$, labour $L$ and technology $A$. Now to produce something, in ...
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1answer
229 views

Long Term Impacts of Austerity Measures

Is there much research into the long term impacts of government fiscal contractions. I have heard about 2nd generation unemployed as a result of Thatcher's policies but that is very much anecdotal. ...
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1answer
74 views

Distribution of Wages

Is there any paper that looks at the distribution of wages? I'd like to see how many workers are in each percentile of labor income. I know that you could compute it using CPS or US tax data, but I ...
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1answer
73 views

How to get details on all the models used for evaluating ACA?

I am trying to track down the models and the underpinnings/details for them for models that may have been used to evaluate the ACA/Obamacare. I am aware of Gruber's (proprietary) model, and am ...
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2k views

What is the difference between “aggregation” and a “representative agent?”

What is the difference between "aggregation" and a "representative agent?" I'm sorry if I'm not entirely clear on this question, but that's why I ask. It seems to me as if a representative agent is ...
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1answer
157 views

Employment Volatility and the Relevance of Aggregate Wage Rigidity

The Mortensen-Pissarides (MP) framework of search labor is the thing in analyzing (equilibrium) unemployment over the business cycle. Shimer showed that the lack of hires is the big margin that ...
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1answer
192 views

Credit Frictions as the source of Business Cycles

Many papers look at the impact of credit frictions onto business cycles, and they almost unambiguously find that credit frictions work as an amplification mechanism of other shocks. For example, ...
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4answers
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
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Friedman k% applied to cryptocurrency

Follow on to this question: Would a cryptocurrency with a base that expanded at a fix rate face fewer difficulties than one with a stagnant base? Edit: I'm referring specifically to the issues raised ...
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Schumpeterian Business Cycles

The basic idea of Schumpeterian Business Cycles is that new technologies require creative destruction but will yield positive growth. These two opposing forces have impacts onto the real economy at ...
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308 views

What is the impact on the money supply of a reduction in the required reserve ratio? [closed]

In April 2011, the money supply was estimated to be 52 million hurls. At the same time, bank reserves were 6.24 million hurls and the reserve requirement was 12 percent. The banking industry, being “...
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3answers
1k views

In what sense are “new-Keynesian” models “new” and in what sense are they “Keynesian”?

Hopefully, the title of this question is quite descriptive. Whilst I have a broad understanding of the research agenda of macroeconomics, I don't have a very good picture of how it is divided into ...
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176 views

Whatever happened to efficiency wage theories?

Older macroeconomics texts give much space to efficiency wage explanations of how unemployment could coexist with wages in equilibrium higher than the reservation wage of workers. However, there ...