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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2answers
35 views

Why did us coal production peak in 1929 and 2008 [closed]

Hint Its because resource depletion causes recession If it's not then answer
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1answer
36 views

AR(1) in Discrete Version of Stochastic Growth Model

If I assume a stochastic growth model in discrete time and the production function is defined as $F(K_{t}(s^{t-1}), L_{t}(z^{t}))$ where $z^{t}$ is history of the technological shock up to time $t$. A ...
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2answers
326 views

Why do many papers not write the actual utility function?

Why do many papers write the intertemporal maximisation problem for the household as \begin{equation}E_{0} \sum_{t=0}^{\infty} \beta^{t} U\left(C_{t}, N_{t}\right)\end{equation} and then do not write ...
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3answers
80 views

Why doesn't government work more like a company when it comes to taxes?

In government, the revenue is fixed (most of the time); you don't have to anything extra to get money from your "investors", i.e citizens. Similarly, from a citizens' perspective, whether ...
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1answer
38 views

How to derive the standard euler equation from the Expanding Variety Model

In the standard expanding variety model where the representative household faces the following CRRA utility function $$ \int_{0}^{\infty} \exp(-\rho t) \frac{C(t)^{1-\theta}-1}{1-\theta}dt $$ and ...
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how to calculate Leontief demand functions from first order conditions of a CES function when sigma tends to 0?

This question is NOT about how to approximate a CES function to a leontief function. Knowing that: $i= good (\begin{array}{*{20}{c}} {1}&{or}&{2} \end{array})$ $j= firm (\begin{array}{*{20}{c}}...
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1answer
58 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 ...
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1answer
29 views

Why we introduce the intermediate good producers into RBC model?

I am learning the RBC model and find some papers that use the intermediate good producers under the monopolistic competitive market. Could you tell me the benefit of this method? Thanks.
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1answer
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Is there inverse relationship betweet prices of interest-bearing assets and the interest rate?

I was wondering about why investors converting out of interest-bearing assets into money in the money market cause the interest rate to increase. Then I remembered that there is inverse relationship ...
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How does one find values of constants in a value function?

Problem: suppose I have the following maximization problem: \begin{align} &\max_{(c_t)_{t \geq 0}}E_0\left[\sum^{\infty}_{t=0}\beta^{t}\ln c_t\right]\\[2mm] \text{s.t.} \quad & k_{t+1}=A^{1-\...
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2answers
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How is buying gold during a recession helpful for the economy?

As far as I can see it, it is a selfish and fearful reaction to bad market conditions that would result in greater deflationary pressure. It is true that it preserves the owner's wealth, but unless ...
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2answers
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Stationarity of cyclical economic data

I'm having trouble understanding how macroeconomic or industry data could be made stationary if there's only a limited length of time series available (e.g. 2012-2019) and I have a time series that ...
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1answer
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Aggregate income

Aggregate income is composed of: • Employee compensation including wages and benefits. • Rent for the use of property. • Interest earned on funds loaned out. • Profits earned by businesses. Where are ...
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2answers
42 views

Does people paying back their debts cause deflation?

The majority of the monetary supply results from credit, with every loan creating pairs of assets and liabilities representing the same underlying value. Considering that every time someone pays back ...
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0answers
25 views

How to choose the autocorrelation type ? MA(q)^2 or AR(1)

I have heteroskedastic and serrialy correlated (autocorrelated) panel data. I want to test it with both dynamic and static models. For the dynamic test, I use GMM and the results of GMM is parallel to ...
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3answers
90 views

How to find daily/weekly data on the state of the economy

I am interested in economic modelling of the correct state of the economy. Figures such as unemployment and gdp come out with a considerable delay. What are good publicly available datasets that are ...
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0answers
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Pareto efficiency analysis of level of M1 growth from quantitative easing

BMO recently conducted an analysis on US monetary policy and noted that quantitative easing has had diminishing effects on M1 growth. Daniel Krieter wrote: QE has fed through to the real economy in a ...
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1answer
33 views

Negative neutral real interest rate

What is the intuition behind having a negative neutral real interest rate?
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1answer
51 views

Nelson-Siegel-Svensson method

I am a college student and I have recently learned about Nelson-Siegel-Svensson method which is used by the German Federal Bank to determine the yield curve. I have to generate yield curves of ...
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1answer
30 views

Which is safer in the long-term, diffuse debt or concentrated debt?

I want to deepen my understanding of risks as posed by debt burdens among actors of an economy. After some literature review, it seems the matter is nuanced; points can be made for both sides. I'll ...
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1answer
58 views

Solow model and economic interpretation of $\dot{K}=sY(t)$

I am reading Robert Solow's 1956 paper, entitled 'A Contribution to the Theory of Economic Growth'. I am trying to understand the economic interpretation of the differential equation $$\dot{K}=sY(t),$$...
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0answers
62 views

Which metrics best characterise 'socialist' and 'capitalist' economies?

I am interested in finding some metrics that capture how 'socialist' or 'capitalist' a country was throughout modern history, and to include these alongside those in the gapminder dataset, to explore ...
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2answers
53 views

Is a financial bubble harmless if rich people choose to hoard their wealth?

The real question is longer than the title suggests. I was reading about Principles For Navigating Big Debt Crisis by Ray Dalio, and he mentioned that an economic bubble happens when too much money ...
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1answer
137 views

The Solow model and his 1956 paper

Reading through Robert Solow's 1956 paper, entitled "The Theory of Economic Growth", I was hoping to find his fundamental difference equation. I was wondering if the following equation is indeed that ...
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1answer
28 views

Capital/Income Ratio in Pikketty's Capital

In Capital by Thomas Pikketty, https://www.robertdkirkby.com/blog/2015/summary-of-piketty-i/, he states that World War I and World War II were the main reasons why the Capital Income to Labour Income ...
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1answer
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Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?

As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to ...
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0answers
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How does the imposition of import duties affect the nominal and real exchange rates in the long term?

Let's assume that a country imposes an import duty on goods imported from abroad. How will this change the long-term real exchange rate between domestic and foreign currencies? How will it affect the ...
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0answers
15 views

What'll happen to production and consumer distortion loss in a large country with tariffs?

Suppose here $P_0$ is the initial world price, and after tariffs is imposed the world price drops to $P_1$. What would be the production distortion loss and consumer distortion loss? Would it still be ...
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4answers
43 views

Discount & Interest rates

Small question, is discount rates and interest rates the same/similar thing in economics? A bit confused regarding this.
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1answer
36 views

GDP calculation on selling house at a profit

This question may appear to be naive, however, since I am having problems understanding it, I had to resort to ask it here. How will the sale of an old house at a profit affect the GDP? Let us say I ...
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1answer
46 views

What is supply-side of economics?

I've got a question for economics that I need help with, here is the question: "What is meant by the supply side of economics? Define the term ‘supply’ in the context of economics and explain the ...
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3answers
453 views

Significance of circular flow diagram?

A staple of intro economics textbooks is the circular flow diagram. Example from Frank et al. (2019, Principles of Economics) What is the significance of the above diagram? One thing it can ...
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1answer
36 views

Circular Flow with Inventories

I´m trying to fully understand the basic circular flow and the equivalence among production, income and expenditure, but considering the accumulation of inventories (still the most basic version, ...
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1answer
29 views

Why doesn't QE cause the federal funds rate to continue decreasing?

Quantitative easing (QE) is essentially a large-scale form of open market operations, in which the Fed buys large amounts of treasury bills of all maturities (ranging from 1-month to 30-year) and ...
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1answer
55 views

What determined the “cost of borrowing money” or the interest rate in a gold-based economy

In the modern economy, the central bank decides the cost of borrowing money using interest rates along with other several tools and technic. But I was wondering, in a gold-based economy (not the gold ...
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1answer
33 views

Neutral technical progress

Recently I learnt that Cobb-Douglas production function has elasticity of substitution equal to 1, therefore it has neutral technical progress. Then Leontief production function has zero elasticity of ...
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1answer
27 views

Expected inflation in the real interest rate equation

Real interest rate = Nominal rate - Expected inflation In the above equation, in a quarterly data-set, which expected inflation shall be used? next quarter (q+1) or the same quarter of next year (q+4)...
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0answers
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Micro foundations of the Phillips Curve

In a typical NKPC: $Inflation_t = \alpha_1 Inflation_{t-1} + (1-\alpha_1) \mathbb{E}_tInflation_{t+1} + \alpha_2 RealMarginalCost + \epsilon_t$ From a micro-foundations perspective, does the ...
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2answers
102 views

Why GDP series always has an unit root problem?

In one of the lecture slides of class that I am currently taking our professor mentioned that when it comes to the GDP is it safe to always assume it has unit root and testing for it is just ...
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0answers
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Increase in Debt / GDP positive or negative for currency?

When a nation-state and/or monetary union increase it's debt to GDP ratio. Is this a net positive or negative for its currency?
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1answer
24 views

Calculating CPI

The question is I know how to calculate CPI in the sense without " a basket of 700 goods and services". How does adding this info change my calculation? I only know CPI= (the price of basket of ...
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0answers
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Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India

This question is from here What does "Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India " this mean? Does it mean the value of exports adjusted for ...
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1answer
37 views

Does Direct Benefit Transfers make an economy poorer?

Printing money and giving to the poor causes inflation. Increases demand and hikes prices. This is basically certain. But on the contrary, a paper titled Debunking the Stereotype of the Lazy Welfare ...
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10answers
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Why do we need to “get the economy moving again”?

Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into ...
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0answers
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Helicopter Money in the time of Covid-19

In this voxEU article by Jordi Galí, he says the following: In the current context, the central bank could credit the government's account (or governments, in the case of the ECB) for the amount of ...
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1answer
35 views

How do the factors of production map to the GDP identity?

How do the 4 factors of production (nature / capital / labour/ entrepr.) map to the GDP components in: $$Y=C+I+G+(X-M)$$ To me it seems that all factors map to all GDP components, simply because it's ...
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2answers
111 views

How does 'building land' fit into economic modeling?

According to the ONS National Accounts 2018 & RICS land valuations and ... Land that is built on has a value that makes it half of the UK's wealth. The rest of the land has a value less than 3% ...
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0answers
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Stabilizing Property of a Taylor Rule

Considering the New Keynesian Model we have the Phillips curve and dynamic IS curve in log-linearized form with price shock $u^{\pi}$ and demand shock $u^{IS}$ :$$\pi_t=\beta E_t\pi_{t+1}+\kappa(y_t-...
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What are the calculations that policy makers do when deciding to ease a lockdown?

I have heard this question framed as making the decision between lives and the economy. But on the other hand, I also read a StackExchange discussion(I am not sure of the link), where it was shown ...
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Keynesian cross. Can there be a situation when the point of equilibirum “runs away”, shifts in response to attempts to reach it?

In Keynesian cross model, as far as I understand, income-expenditure equilibirum is reached this way: when unplanned inventory investment>0, then firms produce less, when unplanned inventory ...

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