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5
votes
1answer
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 ...
12
votes
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 ...
11
votes
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 ...
3
votes
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 ...
6
votes
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. ...
3
votes
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: ...
-4
votes
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-...
5
votes
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 ...
1
vote
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 ...
3
votes
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 ...
2
votes
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 ...
3
votes
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 ...
1
vote
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 ...
6
votes
2answers
121 views

Comparative dynamics in forward-looking equation

I have set up and solved an optimization problem with time $t$ endogenous state variables, $\alpha_t$ and $\beta_t$ and choice variable $s_t$. After some manipulation, the first-order condition for $...
10
votes
1answer
215 views

Do large public companies ever “quit while they're ahead”?

Large public companies (e.g. S&P 500) seem to end their lives in one of two ways: either they're acquired (or taken private), or they go bankrupt. Theoretically it seems like there should be a ...
6
votes
1answer
289 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.
2
votes
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 ...
3
votes
1answer
165 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 ...
2
votes
2answers
69 views

Effect of information on stock indices

The rules for including a stock in indices such as S&P 500 are common knowledge, so everyone can know when e.g. company B is going to enter the index instead of company A. Since ETFs and mutual ...
1
vote
1answer
121 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 ...
2
votes
1answer
254 views

Is the S&P 500 now in a boom-bust cycle?

This question was originally posted at money.stackexchange but was moved here per a commentor's suggestion after the question was put on hold for being opinion-based. The original question was: ...
2
votes
1answer
670 views

Where can I find statistics for numbers of 16-20 year olds in the world?

Where can I find statistics about how many 16-20 years old people do live in the world? If there is no such statistics, how about people in this age-range in europe+amerika?
7
votes
1answer
153 views

State of general equilibrium theories Post Blanchard 2008

This question arose from a useful comment I received upon answering a question on this site, and a recent question from a doctoral student. The so-called theory of general equilibrium (including the ...
6
votes
1answer
147 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-...
4
votes
1answer
128 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 ...
2
votes
1answer
151 views

Augmented Filtrations and Martingales in the Martingale Representation Theorem

Note: This question is related to the following question about complete markets in continuous time. In the linked question, the answer mentions that complete markets in this setting is a result of the ...
5
votes
1answer
162 views

Are symmetric equilibria monotone?

Assume a two player symmetric game is given by $n\times n$ payoff matrix $A$ for the row player (and $A^t$ for the column player). Let $B$ be a matrix such that $\forall i,j\in [n]:B_{i, j}\geq A_{i,...
4
votes
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 ...
8
votes
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.
3
votes
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 ...
4
votes
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 ...
6
votes
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.
4
votes
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 ...
6
votes
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 ...
3
votes
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 ...
8
votes
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 ...
9
votes
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 ...
1
vote
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. ...
8
votes
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". ...
2
votes
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 ...
14
votes
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 ...
4
votes
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 ...
4
votes
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 ...
5
votes
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 ...
1
vote
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 ...
6
votes
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 ...
3
votes
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 $k,\beta \in \mathbb{R}$, $0<\beta <1$?
5
votes
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 ...
4
votes
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, $Y$ = ...
3
votes
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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