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61 views

When the Central Bank sells a bond, where does the money go ultimately?

As the accepted answer points out, the premise of my question was flawed. Thank you for the dispelling of my wrong assumptions. The original question follows. There are two related questions (and ...
26 views

The effect of financing of government debt on the yield curve

Is it reasonable to expect that the US govt's financing of the growing budget deficit and US debt by issuing long term treasury bonds will push long term interest rates higher in the future? Shouldn'...
16 views

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?
58 views

Why is income tax so high? (UK) [closed]

Granted, I expect this question could be easily answered, but I cannot find a definitive reason as to why income tax is pinned at such a high rate in the United Kingdom. I'm not much of an economist, ...
37 views

regression method for data that contain a number of observation for several years

I have a data set about 125 companies. For each company I have the salary and some other variables about the top 5 managers in each company. One observation contains the top 5 managers in each one of ...
92 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 ...
35 views

Price of Anarchy when the cost is to society and not to the selfish agents

Let's say there is some scarce resource and several agents compete to access this resource. Each agent is able to convert the resources into products that are beneficial to society, but each agent has ...
16 views

What is recession? Two quarters of -ve GDP or two quarters of slowing GDP?

I'm confused with the definition of recession. Is it two quarters of negative GDP growth , meaning GDP growing at -1% and -2% or GDP slowing to 2% and 1.5%.
50 views

Abraham (1987) Simple Job Market Matching Model

I have a question about a derivation in Abraham (1987)'s simple job market matching model (equations 3 through 7): She begins by writing down tautologies: J - V = L - U = E where J is the number of ...
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 ...
18 views

Yield curve inversion and recession

Yield curve inversion is often a sign of a looming recession, but is there an explanation of this phenomenon other than the fact that historically we have seen that the two phenomena were indeed ...
9 views

Tariff Metrics & Objectives

The 2019 US administration is applying tariffs to Chinese imports to secure more favorable trading terms. What exactly are the metrics,that indicate if tariffs are effective? What exactly are the ...
70 views

How do I derive Hessian of this function and check for concavity?

The function is $f(K,L)= AK^{a}L^{b}$ on the set of points $(K,L)$ with $K\geq 0$ and $L\geq 0$, assuming $A>0$ How do I find the Hessian and check for concavity?
54 views

utility maximization with nested Cobb–Douglas–CES preferences

I'm trying to understand the following paper: Hsieh & Ossa: A global view of productivity growth in China (2016). The pdf can be found here: https://faculty.chicagobooth.edu/chang-tai.hsieh/...
39 views

Fixes of quadratic utility when probability of decreasing utility is large

In finance and specifically portfolio theory, a popular utility function is quadratic utility $$u(x)=x-\frac{\lambda}{2}(x-\mu_x)^2$$ where $x$ is wealth and $\lambda$ is the parameter of risk ...
26 views

Forecasting Volatility through GARCH and EGARCH models

I am at a final stage of my dissertation but I am a bit confused. I am trying to forecast volatility by using returns through GARCH(1,1) and EGARCH(1,1) models. I use daily prices of indexes to ...
34 views

Solving a problem using CAPM and capital structure theory

I am given the following problem: A firm currently owns assets worth $4$ milllion dollars that have a beta of 1. The risk-free interest rate is 10% and the market risk premium is 8%. Suppose the firm ...
53 views

What does poorest country by population mean?

I understand poorest countries based on GDP but what does poorest countries by population mean? Below is the link to the information I was looking at. http://worldpopulationreview.com/countries/...
31 views

Moral hazard, bubbles, and economies of scale in limited companies and organizations

http://eprints.lse.ac.uk/100058/1/Goodhart_CEPR_DP13494.pdf What would be the disadvantage of limiting the liability to the product of the proportion of the company and the debt(a person with 2% of a ...
16 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 ...
39 views

Whats the math behind calculating the price of cryptocurrency through supply and demand?

"The value of currencies (including most popular cryptocurrencies) is set by a market. Price rises or falls until the supply and demand of the currency are equalized" Why exchange rates of national ...
84 views

Private Investment Impact on Bond Yields

From Japan to the US to Germany, we are currently seeing longer term bond yields falling at an alarming rate. I tune into a fair bit of economic commentary, and can often come to some sort of ...
76 views

Specification bias - estimated variance is biased estimator of true variance of error term

Consider the two models $(a) y = X\beta + u$ where $X$ is $n \times K$ and (b) $y = Z\gamma + \omega$ where $Z$ is $n \times r$. Under classical assumptions (and $Z$ and $X$ are non-stochastic) if ...
47 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 ...
63 views

Why is trade deficit a good thing?

In general most economist agree that deficit is not a negative thing, but I have trouble understanding why For example if country A has 10\$and country A runs trade deficit to B of 2\$ per year, ...
112 views

Alternatives to Capitalism and Communism

Are there any remarkable economists who have envisioned alternative economic system to the ones previously tried? I'm looking for realistic economic system models and their authors.
14 views

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 ...
48 views

Why does one have to ask for a quote to get a price for some things?

When ordering items from some companies, they don't have their prices listed. One rather has to ask for a quote to get a price, having to provide information to do so. Why is this? Why do they not ...
97 views

Can the coming recession - or any recession - be avoided?

I keep reading about all these warning signs of a coming recession, and I have a very silly question: If we can see it coming, why can't we do something about it now, instead of after we are deep in ...
13 views

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?
28 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 ...
11 views

What counts as a “dollar shortage” and how do we know which countries have one?

I recently read an article claiming that China is worried about a possible "dollar shortage," which is news to me. When does this happen, has it happened before, and how do we know which countries ...
57 views

Transforming a matrix of explanatory variable in regression

Given the partitioned regression equation (into $X_1$ and $X_2$), I want to transform $X_1$, say $X^*_1$, such that $X_2$ and $X^*_1$ becomes orthogonal ie. $X_2^T$. $X_1^*$= 0. A matrix can be ...
18 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 ...
36 views

The world's largest companies

There are several criteria (or key figures) to list the world's "largest" companies, giving quite different lists: revenue (in \$) profit (in \$) assets (in \$) market capitalization (in \$) number ...
29 views

Incentive Compatibility Construction Rule

Suppose we are interested in constructing an incentive compatibility constraint for an agent to announce his state truthfully. Consider a simple case of the state space being $S=\{H,L\}$ and his ...
24 views

Hubzu.com bidding terminology - “value-based foreclosure auction” [on hold]

The hubzu website often has properties for bidding that state "this is a value-based foreclosure auction, which means the beneficiary has provided a bid based on market value". However, it then ...
50 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 ...
31 views

Social mobility and income inequality

I once read an argument by the libertarian economist Thomas Sowell against the conventional wisdom that rising income is bad because most statistics which show rising income inequality do not account ...
56 views

Maximin utility function

If someone has the attitude that they want to maximize their worst possible outcome (so they are maximally risk-averse), what does the utility function for that look like? Can this attitude be ...
21 views

Primary difference between FDR and Nixon for de-linking gold with dollar?

I'm unable to understand the different role that both FDR and Nixon, played in de-linking gold with dollar. I do understand that after Nixon, value of dollar is not linked to amount of gold (No ...
39 views

Impact of vegetarianism on the meat industries

My main goal is to get rid of mass husbandry and the environmental impact of industrial meat production. My question is: Is it better to abandon meat from my diet completely or to endorse eco-riendly ...
9 views

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?
21 views

Is a proft tax not distorting unless we know the opportunity cost?

A Profit tax where we actually know the Entire Cost Function Including the Opportunity cost(Time, Incommodation, best alternative for the easily monetized resources etc) is not distorting. But the ...
24 views

Net saving as a percentage of net income

In "Is Piketty's Second Law of capital fundamental?" by Per Krusell and Anthony A. Smith Jr the authors say, in a footnote: Specifically, from the FRED database, we use series A023RX1A020NBEA on ...
24 views

The notation cl co (A)

I stumbled upon this notation, (cl co(A+C), while reading "Set Optimization—A Rather Short Introduction" by Andreas H. Hamel, Frank Heyde, Andreas Löhne, Birgit Rudloff and Carola Schrage. Is it ...
80 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-...
47 views

Can I treat pooled cross-section as panel data and do regression analysis?

I work with a large survey data that is pooled cross-section, i.e, people interviewed are randomly chosen in each time period. This is not panel data. But, I aggregate the individual cells according ...