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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60 views

How does interest rate impact exchange rate?

When I’m using the forward exchange rate formula based on non-arbitrage theory, it tells me that a positive interest rate spread (i_domestic > i_foreign)would cause the forward exchange rate(units of ...
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8 views

What are the factors on which value of all resources ( good, silver, cash land etc. ) found in world changes over time?

And followed by, Does it right to say that, if any country become rich then other must become poor and vice-versa. If no, then Is it possible that, in certain conditions, all Nation in the world can ...
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Regarding Macroeconomic Models

I've recently started my PhD and upon looking at my textbook (the sargent one) I found that it differed greatly from my Masters textbook (Romer) and in turn my undergraduate macro text (williamson). ...
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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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1answer
47 views

Is it bad for the economy of a country if forreign firms buy companies?

If a forreign firm buys a company. For example a Russian firm buys a British company. Is this good or bad or neutral for the British economy? As I see it, the profits of the company will be going ...
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1answer
64 views

What is the difference between a power law exponent and the Pareto exponent?

I use the poweRlaw package in R to fit a power law to my data. I am trying to figure out what is the value of the Pareto exponent. Assume the probability mass function is defined by: $$ p(x) = \...
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165 views

Differences between GVA and NVA?

I have studied these 1) Gross value added= value of output- intermediate consumption. 2) Net value added= gross value added- depreciation. But how could we say "Net value added = Gross value of output ...
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31 views

Why a Current Account deficit implies a Financial Account surplus [duplicate]

Every macro textbook out there states that if a country has a Current Account deficit, it must have a surplus in the Financial account, but I have not heard a convincing explanation. Imagine a ...
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26 views

Which assets beat the injection of money and why?

Suppose a world in which every year $1.03 ^ Y$ liquidity is injected. Which assets could perform better than 3% per year? Growth forecasts for these?
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what are the advantages of using Canonical Cointegrating regressions?

What are the advantages of using Canonical Cointegrating Regressions in comparison with OLS regressions? Thanks.
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1answer
40 views

Consumer's side and producer's side

GDP gives the picture from the consumers’ side, while GVA gives the picture from the producers’ side. By definitions of both GDP and GVA "the amount of goods and services PRODUCED in an economy in a ...
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1answer
151 views

About gross domestic product at factor cost

GDP at factor cost= Net value added + Depreciation. Here my question is why depreciation added to Net value added? I am confused here: Net value added = Gross value added - depreciation; so the above ...
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what is the difference between normal OLS simple linear regression and Canonical cointegrating regression?

what is the main difference between simple linear regression and Canonical cointegrating regression. Why we should use Canonical cointegrating regression instead of OLS?
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1answer
105 views

Why is the cash in circulation on the rise in rich countries?

The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional? For example, here's ...
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18 views

Is a high borrowing rate bad?

I'm not an economist, so this may be a stupid question, but why are high borrowing rates among individuals and corporations bad? Like, I've heard high student and credit card debt mentioned as reasons ...
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40 views

What is the difference between conditional and unconditional risk premia?

This is an asset pricing question. What is the difference between conditional and unconditional risk premia? Here's the context: The fact that carry trade strategies typically earn positive average ...
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1answer
65 views

Solow Model with a Capital Stock Externality

Suppose we have the following form of the Solow Model: $$ Y_t=K_t^{a+b} L_t^{1-a} $$ where a,b >0, and a+b<1. Is it possible to determine the steady state growth rate of k (k=K/L), and the steady ...
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Useful models/theory private debt and borrowed constrained households

In macro oriented research papers the role of private debt is discussed and that apparently when there is a lot of private debt in the economy, households tend to be borrowed constrained.. Could ...
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CPI and real quantities

How is it real wages = old wages * new cpi / old cpi? It seems this discounts back to the reference period and then multiplies out to current day. This would give us new (nominal) wages?
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1answer
31 views

Why does equity have historically poor performance after rate cuts?

I am struggling to understand why equity markets seem to suffer shortly after fed rate cuts. Here is a rather telling chart: Question Assuming not some kind of spurious relationship, what's the ...
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19 views

List of countries moved to developed economies in the last 50 years

I read in Bloomberg that five countries moved to advanced economies in the last 50 years from developing economies and one of them was Singapore. Wondering what are the other four countries? The ...
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65 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 ...
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why data for PPP conversion rates are given annually?

i try to find quarterly ppp rates for currencies to compare actual exchange rates from PPP levels, but all of data is annual? why?
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2answers
100 views

Log linearising (Gali textbook)

In Gali (2015)'s textbook Monetary Policy, Inflation, and the Business Cycle, variables in levels are denoted with capital letters, logged variables with lowercase letters. However, when a log-...
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What are some similarities and differences between the 2001 recession and the 2007 recession in terms of causes and the effects on the economy? [closed]

I know the two were caused by the burst bubbles and worsened by rising interest rates. I also know that the the 2001 recession had a long jobless recovery but did not experience as many bank failures ...
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13 views

How does investment lead to generation of jobs?

I quote from India's Economic Survey 2019 (an official document) - While the claim is often made that investment displaces jobs, this remains true only when viewed within the silo of a specific ...
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Does investment directly influence demand?

I quote from the first page of India's Economic Survey 2019 (an official document) - Investment, especially private investment, is the “key driver” that drives demand, creates capacity, ...
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1answer
97 views

Why is macroeconomics studied through “Shocks”?

"Why is modern macroeconomics all about identifying this shock and that shock?" Coming from a theoretical econometrics background, I have recently delved into empirical macro literature. I am a bit ...
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21 views

How the Balassa-Samuelson affect real exchange rate?

According to standard Balassa-Samuelson effect, when the productivity increases in the tradable sector (GDP), price increase can be observed in non-tradable sector and this can lead to appreciation of ...
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1answer
73 views

CES v. Leontief Aggregator in Production

Consider a production process with two distinct capital types such that there is a capital aggregator. You could view $k_v$ as a more versatile capital (e.g. can be converted into many different ...
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24 views

When Balassa-Samuelson effect increases, real exchange rate depreciate?

I researched several literatures related with Balassa-Samuelson effect and according to literatures, as Balassa samuelson effect increases, real exchange rate appreciates. However according to the ...
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11 views

If PPP Exchange rate is 0.291, what does that mean?

I've normalised deflators for countries A and B. If the Price level of Country A/ Price level of country B = .291, does that mean that on average for every dollar a person in Country B spends, for the ...
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39 views

How to calculate PPP Exchange Rate using GDP deflator?

I'm doing a project and I'm asked to find Purchasing Power Parity exchange rate. The way the teacher says to do it is to divide my countries GDP deflator by the US GDP deflator over a time series. Is ...
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1answer
37 views

Having a lower inflation rate is not the same as having lower overall prices?

Having a lower inflation rate is not the same as having lower overall prices.Why? lower CPI(inflation) means price levels in country decreases?
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1answer
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If I find the GDP deflator (i.e., price level) for a given time series, can I then find real consumption given nominal consumption?

I've found the gdp deflator for a country over a 25 year span. If I have nominal consumption for the same time series, then I just have to divide nominal consumption by the p-level I found with the ...
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19 views

Does anyone know how to find disposable income data? [duplicate]

I'm doing a macro project and I need to find disposable income data over a 25 year period. My professor said that this metric data is available directly on the World Bank website. I've searched ...
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28 views

How to Find Real Disposable Income for Iran?

I'm doing a project for my macro course, and I'm trying to find real disposable income for Iran over a 25 year period. In my course Disposable income, $Y_d = Y - T$, where $Y$ is output (income) and $...
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2answers
49 views

How to deal with misspecification of models in Macroeconomics?

I'm wondering what methods are used in economics, specially in macro, to deal with model misspecification. I've already searched the web, but I may be missing some methods. Therefore, I ask you for ...
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1answer
117 views

Could a “Japanese-style strike” work as it's supposed to? Under what conditions?

This is an urban legend, mostly believed in Spain and some countries in South America. The legend is based on the premise that their way to make a strike would be to work much more than usual in some ...
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1answer
40 views

Would it be accurate to say that the economies of most of the countries are capitalistic?

What is the proportion of countries that are capitalistic? What is the proportion of the planet's population who live in such countries? How is this, (somewhat subjective?)
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The rationale for using a lagged variable to address endogeneity arising from simultaneous causation?

when there is simultaneous causation between dependent and independent variables often in papers we see a lagged variable being used in place of contemporaneous variable. For example, Clemens, ...
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25 views

Market Clearing with Dividend and Investment

In pure exchange GE models, a typical goods market clearing condition for good $n$ looks like: $$\sum\limits_{i=1}^Ic_n^i=\sum\limits_{i=1}^Ie_n^i.$$ Consider a model with production where firms can ...
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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 ...
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62 views

What is the interpration of results if adding or subtracting a control variable effects the significance of explanotary variables?

I am conducting some regressions on economic growth determinants and I am disillusioned. Essentially by choosing what groups of variable to regress I can get the desired significance. What does this ...
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30 views

how Ballassa Samuelson affects real exchange rate? [duplicate]

I get confused. How "Balassa Samuelson effect" influences real exchange rate?
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1answer
36 views

Meaning of assumptions regarding continuum of agents in economics models

I am reading an economics paper which contains a model with households and banks. In the model, banks are owned by households. The authors make this assumption when they discuss households (section 2....
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1answer
75 views

rental cost of capital

I am estimating time series for rental price of capital using Hall-Jorgenson method: $$r=\frac{P_k}{P}(i-inf+\delta)$$ here, $r$ is the rental cost of capital, $P_k$ is the price of capital goods (...
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What are the income and substitution effects of deficit-financed government stimulus in comparison to marginal rate tax cuts?

What are the income and substitution effects of taxation in a simple way ?
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Proving the existence of a steady state

I am trying to prove the existence of at least one stable steady state in a situation where I am given properties of the production function but not an explicit functional form. I have the following (...
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1answer
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US Real GDP Growth Rate

I am interested in finding the quarterly real GDP growth rate of US and have found the following two measures from IMF International Financial Statistics: Which one should I choose (Dark Green or ...

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