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116 views

The $\sqrt{N}$ convergence of semiparametric estimators of Newey 94, why does it converges to a normal distribution?

The famous Newey 94 paper on the asymptotic convergence of semiparametric estimators with a first non parametric step and a second parametric one, http://www.jstor.org/stable/2951752, establishes that ...
2answers
2k views

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 ...
3answers
394 views

Can econometrics test for correlation or causality between prices and corruption?

This week there was news that some prices are rising. I heard that in some countries where corruption is high the prices are also higher. I wonder if there is causaility or just both at same. It would ...
3answers
1k views

Deriving and explaining the weighted cost of capital

The Wikipedia article for the "weighted cost of capital" (WACC) defines the WACC as "the rate that a company is expected to pay on average to all its security holders to finance its assets." What ...
1answer
101 views

Showing that a transformation is measure preserving

Note: This question is related to this question about the construction of stochastic processes. Specifically, it relates to the transformation $\mathbb S: \Omega \rightarrow \Omega$ that is mentioned. ...
0answers
138 views

Applying the Martingale central limit theorem to the score process of an autoregressive model

This question is a natural continuation of the following question: How do I construct the score process of a Markov model and verify that it is a Martingale? In this problem, we set up as follows: ...
1answer
78 views

What is the serious problem when Fed implements Zero interest-rate policy? [closed]

Under the Zero interest-rate policy, people will keep spending spending money & there is no savings. I believe saving is good. So, What is the serious problem when Fed implements Zero interest-...
1answer
1k views

What is the significance of the Hansen-Jagannathan bound?

The Wikipedia article on the Hansen-Jagannathan bound is short, giving only the following: Hansen–Jagannathan bound is a theorem in financial economics that says that the ratio of the standard ...
1answer
410 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 ...
2answers
172 views

Will China's GDP be greater than the USA's and Europe's combined?

A newspaper said in 2080 China can be a developed country, with a bigger population. Does that mean China's GDP is going to be bigger than the USA's and Europe's combined? Also, is this possible even ...
1answer
480 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 ...
1answer
109 views

What would happen to the economy if the Fed's discount window completely stopped?

I'm curious what would happen the the US economy (and perhaps others) if the overnight lending capability of the Fed ceased operation for some reason (perhaps a cyber attack) for a non-trivial period ...
1answer
94 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 ...
2answers
121 views

2answers
335 views

Black-Litterman---in what way are expected returns hard to estimate?

In the Wikipedia article about the Black-Litterman model, it states that the motivation behind model is that "it is difficult to come up with reasonable estimates of expected returns." Why is it that ...
2answers
6k views

What is the advantage and disadvantage to have a high value of USD for USA?

What is the advantage and disadvantage to have a high value of USD for USA? China and Japan always want to keep their currency low as oppose to USA.
1answer
209 views

Does rioting impair the economy?

In this article, the author looks at some of the indirect effects caused by the rioting in Ferguson, Missouri after the jury's decision not to indict the police officer. He explains that the rioting ...
1answer
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 ...
4answers
6k 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.
2answers
96 views

International date line

What if international date line being shifted to Atlas Ocean? Most of trade partners will have different date, States and all America continents will enter day first etc. So what can be coincidence of ...
3answers
3k views

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 ...
1answer
119 views

Educational self sufficiency

I heard on UK and US news that higher education is very high and a lot of students are in debt. In Israel here education is very cheap, because it is heavily subsidized by the government (Israel tries ...
1answer
177 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 ...
2answers
136 views

Why are ecology and economics seemingly disjunct topics?

The words ecology and economy are very similar. Ecology derives from the words οἶκος + λογία, i.e. the study of the house/household. Economy derives from the words οἶκος + νόμος, i.e. the laws of ...
1answer
1k views

What is establishment-level data

National level or aggregate level data and firm-level data are self explanatory. I have seen certain papers on productivity analysis as well as other topics which refer to "establishment-level" data. ...
2answers
142 views

How/why does foreign investment get scared by the monetary policy?

In an interview with Daron Acemoglu, he says "the hot money which was floating through Turkey has stopped after FED's declaration that we are going to give much more attention on monetary policy". ...
2answers
302 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 ...
1answer
642 views

Have there been instances where economists have advocated a trade embargo?

Due to Comparative Advantage, it is generally accepted among economists that free-trade is the best policy for a country and increases the standard of living for the citizens of that country and the ...
2answers
79 views

Literature / Evidence on Cash Hoarding of Firms

I have received anecdotal evidence (heard stories) about many firms hoarding cash (liquid assets) post 2008 and not spending it despite availability of many projects with positive NPV. However, when I ...
1answer
915 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 ...
1answer
174 views

Portfolio choice of a risk lover

Take the standard portfolio choice problem as presented in MWG (p.188-189), but with a risk loving decision maker: with initial wealth $w$ invests an amount $\alpha$ in a risky asset with a random ...
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 ...
2answers
344 views

Does Abatement Cost Mean Cost of Reducing Emissions with Output Held Constant?

In the economics of pollution control, frequent reference is made to 'abatement cost' and/or 'marginal abatement cost'. Is it normally implicit in the use of these terms in economics that output is ...
3answers
471 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 $k,\beta \in \mathbb{R}$, $0<\beta <1$?
1answer
2k views

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 ...
1answer
93 views

Demand function estimation

The model specification is: $$D_{ij} = A + aP_{ij} + bY_{ij} + cN_{ij} + e_{ij}$$ where: $i, j$ = $i$-th year, $j$-th month, $D$= demand (outgoing minutes) $P$ = average price of call, $Y$ = ...
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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