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1answer
33 views

Does the UK have a trade agreement with Australia?

I'm assuming since the UK was a member of the EU, the EU was responsible for any kind of trade arrangements between the UK and Australia but I'm not entirely sure. Does the UK have an agreement with ...
0
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0answers
11 views

Why do we spread knowledge across nations?

We have access to lots of knowledge on paper sharing platforms, open course platforms, open-source platforms and question asking platforms and etc. I don't know why we are not afraid of the backfires ...
0
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0answers
20 views

Few questions regarding treasury bills

I have a few questions regarding repurchase markets. My professor told our class today that Repo (Repurchase) Markets are essentally markets where the government lends corporates a very cheap rate of ...
0
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0answers
26 views

Is optimizing revenue and expense objectives simultaneously better than optimizing profit as composite objective?

In the profit maximization problem, I am curious if co-optimizing revenue and expense objectives simultaneously are better than optimizing profit (revenue - expense) as a single composite objective? I ...
0
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0answers
31 views

How to calculate the maximum willingness to pay? (Reservation price)

I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help. Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have ...
0
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2answers
32 views

How to derive substitution and income effect using Slutsky equation if we don't know which of the prices change?

We have the utility function $$U(x,y)=x + y$$ and we have to derive the substitution and income effects using Slutsky equation. But after I derive the Hicksian demand functions for e.g. x: $$h_x= \...
2
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1answer
37 views

Within-Cluster Correlation

I figured this would be more appropriate on this forum. I came across the following slides after a Google search of cluster-robust uncertainty estimators. On slide 10 the author attempts to ...
0
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1answer
21 views

How can I control for trade between UK and Australia in my difference-in-difference trade model?

I am doing a report on whether environmental regulation has an impact on trade, using a difference-in-difference model and seeing whether the EU Industrial Emissions Directive had an effect on UK ...
0
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2answers
51 views

How can I estimate the disconnect between book value and market capitalisation?

There are several questions on Stack Exchange as to what difference the stock price makes to a company after its IPO. Surely, management cares, it is important to be credible to trading partners, etc. ...
0
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0answers
20 views

Solution to the Aiyagari model: why a sparse capital grid?

When solving a model à la Aiyagari, why is it needed to have more points close to zero? I would be grateful if you could point me out some reference on how to implement the sparse grid. In ...
1
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3answers
51 views

What is the optimal forecast for the following moving average model?

Suppose that we have an MA(1) model where $y_t=\epsilon_t-\frac 1 2 \epsilon_{t-1}$ and $\epsilon_t$ are i.i.d. I want to find an optimal forecast of $y_{T+1}$ in the form of $Cy_T$ where C is a ...
1
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1answer
25 views

How did the massive flight to long-term bonds create a liquidity crisis?

A few weeks ago I noticed that several blogs and such were adamantly proposing that the Fed lower rates immediately by 50 bps. They said that the flight to safety -- to long-term government bonds -- ...
3
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1answer
234 views

Who invented these key notions in Finance?

We often give credit to the origins of academic achievements. The Black-Scholes equation or the Gibbons Ross Shanken (GRS) test etc. What about Net Present Value (NPV), Internal Rate of Return (IRR),...
0
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0answers
26 views

What if the government impose both price control and supply restriction on the market?

Due to the virus outbreak, there is a surge in demand for mask and hand sanitizes. To prevent price hiking government impose a price ceiling on the products, however consumers are behaving irrational (...
0
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0answers
7 views

Find yield rate (bid-ask spread)

On March 2, a Treasury bill expiring on April 20 had a bid discount of 5.86, and an ask discount of 5.80. Calculate the best estimate of the risk-free rate to be used in valuing options with the Black ...
0
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0answers
24 views

Okishio theorem

The tendency of the rate of profit to fall (TRPF) is a hypothesis in economics and political economy, most famously expounded by Karl Marx. The central idea that Marx had, was that overall ...
0
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2answers
77 views

What if price were a function of buyer's income?

If everyone's income were public information, would purely profit-seeking sellers benefit from charging different prices to people based on their different incomes? My intuition says yes because a ...
0
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0answers
20 views

What percentage of economists recommend basic welfare like food stamps and temporary assistance for needy families?

Is it similar to minimum wage in that opinion is approximately split down party lines, seen in this 2006 survey: https://people.uwec.edu/jamelsem/fte/fte/efl/teacher_stuff/articles/economists_agree....
0
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1answer
40 views

If a Chinese person wants to buy an iPhone or any international goods, which GDP per capita would be a better indicator?

Which GDP per capita of a Chinese citizen would better reflect their affordability- Nominal GDP per capita or PPP GDP per capita of China? My question is would PPP would matter much in case of buying ...
4
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1answer
39 views

Is there any evidence for consumer utility-maximising behaviour, at individual or market level?

Even though utility maximisation is ubiquitous in economic textbooks to model consumer behaviour, its usefulness is rarely demonstrated by evidence. Is there any evidence that some consumers do ...
0
votes
1answer
54 views

Euro BUND Future CTD Bond

I'm trying to understand valuation of the Euro BUND Future. As to my understanding, the price of the future should be: The price of a government bond issued by the Federal Republic of Germany That ...
0
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1answer
23 views

Negative long term effects of wage cap, especially on purpose of money?

It can be figured that a wage cap could have some noticeable short term effects - mainly, those who are higher paid will not receive as much money anymore, meaning less spending by the richest in the ...
0
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1answer
42 views

Running a regression to avoid multicollinearity

I have the following regression (pooled OLS; panel data): Y Treated Shock Shock*Treated {with industry and year fixed effects} Y is a continuous variable, “...
1
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1answer
22 views

What's the difference between loans, notes, bonds and mortgages?

Long-Term Investments Multi-year investments in: Debt securities: loans, notes, bonds, mortgages Equity securities: shares of other companies These assets are normally not intended to be sold (and ...
0
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0answers
25 views

Is short-run and long-run marginal cost and average cost the same in perfect competition?

I am reading this resource on perfect competition (https://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=perfect+competition). I understand the basic concepts underlying perfect competition ...
0
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1answer
28 views

Whats the meaning of this parameter?

I was looking the currency exchange board, and I saw the value of "exotic" for the parameter Group, what is the meaning of this value? I dont know if this is a local figure or is used in currency.
-2
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0answers
8 views

Differentiated products price and quantity

I have an upcoming homework for which I struggle to find the solutions. It is a confusing one and I cannot figure out the d coefficient. How am I supposed to find out of nowhere? Consider two firms ...
0
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1answer
24 views

How to interprete independence between treatment indicator and outcomes?

In Woodridge's textbook "Econometric Analysis of Cross Section and Panel Data", page 907, it says ...the treatment indicator $w$ is statistically independent of ($y_0$, $y_1$), as would occur when ...
9
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1answer
12k views

Lagrangian: How to understand the No-Ponzi Condition

In http://www.uni-hamburg.de/fachbereiche-einrichtungen/fb03/iwwt/makro/slides2.pdf page 8, lagrangian is written as follow: $$L = E_0 \sum_{t=0}^{\infty}\beta^t\{U(C_t,N_t) + \lambda_t(P_tC_t + ...
7
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1answer
116 views

Are there any surveys of economists on the determinants of healthcare price increases in the US, particularly over several decades?

It was asked recently on politics SE what drove healthcare (actually healthcare insurance) prices in the US to rise faster than the CPI. Neither of the top two answers resorted any actual econometric ...
0
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0answers
15 views

How do advertisements affect the cost curves of a firm in an oligopoly?

I am trying to figure out how advertising would shift cost curves in an oligopoly. I am guessing that an advertisment campaign for a company would shift the average total cost curve upwards (but not ...
9
votes
1answer
346 views

LEN-Model equivalency

Starting position is a principal-agent-model with incomplete information (moral hazard) and the following properties: Agent utility: $u(z)=-e^{(-r_az)}$ Principal utility: $B(z)=-e^{(-r_pz)}$ Effort ...
0
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0answers
23 views

Why economy has cycles?

If the economy growth, why it does it cyclically instead of linearly? I am looking for an intuitive explanation because the web is full of technical ones.
2
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1answer
79 views

Why does the US government not invest in the stock market?

We often talk about the huge public debt of the US government. Why does it not invest in the stock market (at least in index funds) instead of issuing debt? Can they not reduce the debt that way?
1
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1answer
26 views

Will a shift in the average total cost curve mean that the marginal cost curve will also shift up?

I understand the basic concept of marginal cost and average total cost. I am currently learning about costs curve for an oligopoly I read online that the marginal cost is not determined by fixed ...
0
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1answer
29 views

Perfectly elastic supply

How would you algebraically write a perfectly elastic supply? Will it be infinite at price = 4? (The choice of the number 4 is completely arbitrary)
0
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1answer
28 views

Why would an investor choose to invest in one index fund as opposed to another?

Assuming no transaction costs or management fees, why would an investor choose to invest in a fund tracking the Nikkei 225 over say the S&P500. If I was quite bullish on Japan, and I made the ...
1
vote
1answer
34 views

Why does the stock market tend to grow over time

At its most basic, the value of a stock depends on how much people are willing to pay an entity that already owns the stock to transfer ownership. The question is, why does the amount people are ...
3
votes
1answer
92 views

Is the Nash product really maximised ex post?

In my game theory class this term, we studied Nash bargaining. It is only now when starting to prepare for the exam that I have come to realise there is something I fundamentally don't understand, and ...
0
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1answer
42 views

Grim strategy and SPNE

I know how to play the Grim strategy for player 1 for example we go: $$40 + \frac{25}{R} > x + \frac{1}{R}$$ And solve for $R$ (= rate) But I'm not quite sure what my $x$ should be. Or in ...
-3
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0answers
50 views

Why do profit margins fall in recessions [closed]

Profits are the difference between input and output prices. Input prices should fall faster if investment demand causes recessions. So tell me why profits fall
0
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1answer
17 views

Limited Liability in Agency Problem

Consider a simple one-period model where a creditor provides $I$ as investment to a firm and firm produces $\pi_G$ or $\pi_B$ depending on its performance. Let $R_i$ the portion of the profit that the ...
1
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1answer
3k views

Why is depreciation added to the GDP with the income approach?

In my economics textbook, it states that when calculating GDP using the income approach, depreciation should be added. Specifically, GDP = Employee Compensation + Taxes less subsidies on businesses + ...
-5
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0answers
47 views

Why dont capitalists use demand side economics [closed]

An asset manager with trillions could buy up a small economy like Singapore or Nigeria and stimulate it for a 300% multiplier if its in a recession. What stops capitalists from using demand side ...
0
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0answers
15 views

Analytically solvable examples of quantal response equilibrium

I have been reading up on quantal response equilibrium and am looking for some simple examples which can be solved analytically (in order to gain some intuition about how exactly QRE works). To be ...
4
votes
1answer
40 views

Is the consumer surplus on a Giffen/Veblen good negative?

When drawing the demand and supply curves on a quantity/product space for an upwards sloping demand, assuming the two curves intersect, I noticed that the traditional consumer surplus region lies ...
0
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0answers
48 views

Solving for value function (non-Bellman)

I am trying to build a model and am having trouble getting a closed form solution for this value function: $$V(h_{t})=\max\limits_{{k_{t+1},\tau_{t},l_{2},I}} ln[w(h_{t})[1-l_{2}-\alpha I]-k_{t+1}-\...
0
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1answer
21 views

Computation of Different Axiomatic Barganing Solutions

I need help with the following question. Take a two-agent bargaining problem. d=(0,0). Pick a strictly concave function for the bargaining frontier. Fix the intersection of the frontier with the y-...
0
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1answer
35 views

How do I derive the aggregate demand function given two utilities functions?

Assume that we have two people with the same utility function of $U_i = x^{1/2} + y^{1/2}$ where $i=1,2$ and $I_i$ is the income. Let $P_x$ denote price of good $x$ and $P_y$ denote price of good $y$. ...
0
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0answers
44 views

SPNE with 3 players in a three

First picture: we always do the roll back scenario, (B,M,F) so Francisco start and 2 > 0 in the last node so therefore he will be in. And if Franscisco is in, McDonalds at the last node, have to ...

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