All Questions
14,680
questions
1
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3
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What is the economic intuition of prudence in the static case?
How can we interpret a "prudent" agent in the static case (i.e., someone with $u'''(\cdot)>0$)?
I understand that in a dynamic setting, someone exhibiting prudence would do precautionary ...
- 21
0
votes
0
answers
5
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Why is my growth rate changing after changing base year for inflation?
I had the following problem: a client of mine calculated income growth rates using 2017 as base year for inflation, except for the 2015-2020 growth indicator, where they used 2020 as base year. Wanted ...
- 101
1
vote
1
answer
16
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Has the Arrow-Pratt measure a lower bound with DARA utlity?
Say I have the following utility function:
$$u(x,w)=f(w+x)$$
This utility exhibits decreasing absolute risk aversion ($f'>0$, $f''<0$ and $f'''>0$). $x\in R_+$ is the control variable and $w\...
- 21
0
votes
1
answer
34
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Are bailouts destabilizing the global economy?
I saw this posited in this WSJ opinion piece here
Notes on the Fed
In 1998, engineering a \$3.6 billion rescue of the giant hedge fund Long-Term Capital Management.
In 2001, slashing interest rates ...
- 109
0
votes
0
answers
21
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Max and Min with $\leq$ and $=$ constraints. General questions
I wrote this question on Maths.stackexchange but perhaps this community suits better (?)
I need to ask you for this question, which is a rather general one, in order to understand how to behave when ...
- 101
2
votes
0
answers
18
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impact of a gradual adjustment of the federal funds rate
Although the Federal Reserve has been raising interest rates for about 1 year, and inflation has slowed down, prices are not going down much. What are the benefits of raising rates slowly? Obviously ...
- 83
3
votes
3
answers
72
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The formula for expansion path
Is there a way how to precisely compute the expansion path?
I know a consumer's utility function $U(\boldsymbol{x})$, I know the budget constraint $\sum P_i x_i \leq M$, I am able to compute the ...
- 670
1
vote
0
answers
12
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Dynamic investing problem - Private Equity
I've been thinking about the following problem.
Consider an agent who starts out with \$1 and on any given day $t$, is given the opportunity to invest in an asset with expected return $\mu_t$ and ...
- 173
2
votes
1
answer
21
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Is Difference-in-Differences still valid when treat or control is determined by subjects?
I have a question about the difference-in-differences method. I am considering using it to evaluate a policy, the UK's Help-to-Buy (H2B) equity loan scheme. The housebuilders can choose to join the ...
2
votes
0
answers
36
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Different elasticities of substitution
I have been reading into generalizations of the concept of elasticity of substitution for more goods/inputs and three main possibilities emerged:
Hicksian EOS
Allen-Uzawa EOS
Morishima EOS
HICKS
As ...
- 670
0
votes
0
answers
19
views
10-K missing for bank on sec.gov [closed]
PACW filings
If I search for PACW on sec.gov, I get a page with links to the 10-K and other filings:
https://www.sec.gov/edgar/browse/?CIK=1102112&owner=exclude
...
- 319
0
votes
0
answers
41
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Federal Funds Rate & Reserves Market Contradiction
Edit: I do understand this isn't how things work anymore, since we are in a "Ample-Reserves Framework" and the quantity of reserves no longer makes a difference that much and it is primarily ...
- 25
2
votes
0
answers
29
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Which utility functions generate constant (but arbitrary) price/income elasticity of demand functions?
I want to estimate a demand function, and for convenience, I would suppose it has constant price and income elasticities: $\varepsilon$ and $\eta$, let's say. That is, demand $x_i(p, w)$ would be ...
0
votes
0
answers
24
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Can someone help me find the perfect Bayesian Equilibria of this game? [closed]
Hi, I had my microeconomics exam yesterday and I was stuck at finding the perfect bayesian equilibria for the game in the picture. I would greatly appreciate if someone could provide me the solution ...
0
votes
0
answers
30
views
Constructing a game given its mixed strategy equillibrium [closed]
Construct a 4x4 game that has a unique Nash equilibrium. This unique equilibrium should be
in mixed strategies (using all 4 strategies of each player: A, B, C, D for player 1 and a, b,
c, d for player ...
- 1
2
votes
2
answers
52
views
Reserve ratio from H.8 report
Reserve ratio definition
Macroeconomic textbooks define reserve ratio as reserves / deposits.
So for example, the following bank:
has a reserve ratio of ...
- 319
1
vote
0
answers
20
views
How to interpret impulse response functions?
I need your help. How do I interpret the following impulse response functions in sequence to a growth factor shock in the context of an RBC model?
And how can it be that the marginal tax rate ...
2
votes
0
answers
25
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Dispersion of housing prices in Hsieh And Moretti (2018)
I have been reading 'Housing Constraints and Spatial Misallocation', by Moretti and Hsieh, AEJ Macro 2018, https://www.aeaweb.org/articles?id=10.1257/mac.20170388
In their equation (7), they derive a ...
- 21
1
vote
1
answer
21
views
Factor changes in Melitz (2003) model
What would be the effect of changes in factor supplies, for example labor, on the open economy equilibrium?
- 1,511
5
votes
1
answer
109
views
Does the Rybczynski theorem also hold in modern trade theory models?
Does the Rybczynski theorem also hold for modern Melitz (2003) type trade models?
- 1,511
4
votes
2
answers
203
views
Why is the supply function the first derivative of the profit function in the long run?
We have the profit function of the firm profit = $p^2 -2p -399$.
We take derivative of it we say that the output supply function is =$2p-2$
I understand that Profit = q*p - TC
But why do we say the ...
4
votes
0
answers
25
views
What kind of loans was Credit Suisse given by the Swiss central bank, recently?
Credit Suisse was recently extended \$54-cum-\$108 billion loans from the Swiss central bank, even as its takeover by UBS was announced (partly covered by taxpayers).
I'm slightly more familiar with ...
- 3,888
1
vote
0
answers
22
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Subgames in imperfect information games
I have not previously come across three player games and I am trying to solve for the subgame perfect NE/equilibria for the following game, where player 3's decision node is linked to the decisions of ...
- 11
1
vote
0
answers
10
views
what could be the effects of lack of copyright and Patent protections on a country's economy?
would it hinder or encourage growth ? since without incentives to profit from discoveries and creativity there wouldn't be newer innovations but at the same time could ease of access to copyright help ...
1
vote
0
answers
25
views
The derivation of the distribution of F-statistics in Hansen's textbook
In Hansen's Econometrics textbook chapter 5 on normal regression model, he claims that
$$\textbf{e}'(\textbf{M}_1 - \textbf{M})\textbf{e} \sim \chi^2_q$$.
How to derive this result?
0
votes
1
answer
30
views
If 15 percent of jobs are becoming automated compared to 1993, why are retirement ages rising?
Given that human labour is less necessary with every year that passes, why not tax automation rather than raise the age of retirement?
- 143
0
votes
1
answer
40
views
Why do all filled bids receive the same rate, which is the rate of the lowest filled bid, during the US Treasury auction process?
This question pertains to the US Treasury auction process. {1} states:
Treasury auctions are designed to minimize the cost of financing the national debt by promoting broad, competitive bidding and ...
3
votes
1
answer
51
views
stochastic optimal control/FOC/Reis(2021)
Reis (2021) `The constraint on public debt when $r < g$ but $g < m$' :
HJB:
$$\rho V(a, q) = \max_{c/a, k/a} [\log c + V'(a,q)[r + (mq-r)\frac{k}{a} - \frac{c}{a}] a + \frac{V''(a,q)}{2} (k/a)^2 ...
- 423
1
vote
1
answer
57
views
Supply function of a price-taking firm with a quadratic production function
For a firm with the production function
$$Q = 40L-L^2$$
where $L$ is labor and wage $w = 20$ find supply function of a price-taking firm under perfect competition. Fixed costs equal $10$.
Following ...
- 13
1
vote
0
answers
27
views
Why does the Croatia-Euro to USD exchange rate differ from the Eurozone-Euro to USD exchange rate in the list of Treasury reporting rate of exchange?
Looking at the list of Treasury reporting rate of exchange, I see that the Croatia-Euro to USD exchange rate (0.925) differ from the Eurozone-Euro to USD exchange ...
2
votes
1
answer
45
views
Process of deriving TVC(transversality conditon)
In Kruger's note, the process of deriving TVC is expressed as:
$0=lim_{t \rightarrow \infty} \beta^t U'(f(k_t)-k_{t+1})k_{t+1}=lim_{t \rightarrow \infty} \beta^{t-1} U'(f(k_{t-1})-k_{t})k_{t}
=lim_{t \...
- 146
0
votes
0
answers
6
views
Fama French 3 factor model paper on asset pricing anomalies
In their paper, "Multifactor explanations of asset pricing Anomalies (1996)" Fama french states in Table 6 that they observe a Momentum effect in their 12-2 portfolio because If I look at ...
- 101
0
votes
0
answers
13
views
Predicting the Impact of War?
How would an economist go about predicting the impact of a potential war on a certain country's economy?
Say we are interested in assessing the impact of a possible war over Taiwan on the GDP of ...
- 327
2
votes
1
answer
24
views
Prove strict monotonicity of utility function
I have the following utility function: $$ u(x_1, x_2, x_3) = med(x_1, x_2, x_3) $$ Given that $UMG_{i}$ ≥ 0, the utility function represents a strictly monotonic preference. Does this assertion make ...
2
votes
1
answer
22
views
What happens to the LM curve when the interest rate is fixed?
Suppose the interest rate $i$ is fixed at $\bar{i}$. How does the LM curve look like in this case? I suspect that it looks like a vertical line on the $Y$ (x axis) v/s $i$ (y axis) graph. I think so ...
- 23
1
vote
1
answer
35
views
Effect of QT and higher bond yields simultaneously
I don't know much detail about how banking is working so you will have to bear with any misinformation or false conjecture I may have.
The US government wants to control inflation in 2023. The Federal ...
- 83
-4
votes
0
answers
72
views
I've asked chatGPT to ask chatGPT [closed]
I have recently posted this question.
I realized I could post a lot of similar ones by just exchanging the variables; but I just asked chatGPT to write a prompt similar to my own and asked it that one ...
- 28k
-3
votes
0
answers
84
views
I've asked chatGPT to explain pairwise relationships between economic variables [closed]
I asked chatGPT something, but I know its answers aren't always accurate. Please tell me if its answer is flawed in any way. And if you can give a better answer, please do so.
Please explain to me ...
- 28k
2
votes
1
answer
61
views
Relationships between several economic concepts, and chatGPT's explanation [closed]
Sadly I have so little knowledge of economics that I can barely read the news these days. Answering my questions the old fashioned way (via Google) tends to confuse me more. So I asked chatGPT, but I ...
- 29
2
votes
1
answer
26
views
Diff in Diff: Why do we control for unit and time fixed effects instead of just treatment status and pre/post indicator?
In a multi-period DiD analysis, the usual specification is:
$$y_{it} = \alpha_i + \theta_t + \beta D_{it} + \epsilon_{it} $$
where $D_{it}$ is the interaction between ...
- 243
1
vote
1
answer
33
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Positional externalities - Are marketing and higher education examples of market failure?
As Mankiw explains in chapter 10 of the latest edition of Economics (chapter 9 in the previous few, I believe).
Positional externalities lead to "a professional squash player getting the extra ...
- 375
1
vote
1
answer
113
views
Do banks pay interest on the money they create?
A bank takes in \$10 in deposits and makes \$100 in loans, creating \$90 of new money. They pay the depositor interest on the \$10 and earn interest on the $100 loan.
It looks to me like they don't ...
- 11
0
votes
0
answers
26
views
Steps for obtaining the equilibrium price in Hoteling model with switching costs
On pages 521-522 of Kemperer's paper (1995) is an example to the theory, that basically contains what's in these slides:
I've been trying and failing to get the equilibrium price $p^A_1$ shown on ...
- 180
3
votes
2
answers
97
views
What is the budget constraint when we assume a common utility function?
Let's consider an exchange economy with two identical consumers. The
common utility function is:
$$u^i (x_1, x_2) = x_1^α x_2^{1-α} \;\;\; \text{for} \;\;\; 0 < α < 1.$$
Society has 10 units of ...
2
votes
0
answers
45
views
Complete markets and convenience yields
I have been reading some papers on the safety/liquidity of US government debt and got a bit perplexed by the assumptions made in some of those papers. For example, this paper by Mehrotra and Sergeyev ...
2
votes
2
answers
117
views
Finding Walrasian equilibria when Walrasian demands are not unique
I'm trying to solve the following excercise:
Find the Walrasian equilibria for a pure exchange economy where agents' ($A$ and $B$) preferences and endowments are given by:
$u_A = x_A + y_A$
$u_B = 2 ...
- 1,146
2
votes
1
answer
23
views
How would a Central Bank Digital Currency be different from a private bank deposit?
Both are digital, both can be transferred digital, and both are denominated in the same currency. A CBDC is "a direct liability of the central bank, rather than of private banks or coin issuers&...
- 21
1
vote
1
answer
34
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How to properly annualize cost of initial investment
Let say you manage a supermarket chain and want to estimate profitability of a store over time, not only by using revenue and cost for a given unit of time - but also to include the initial investment ...
- 111
3
votes
1
answer
45
views
Bank runs, deposit guarantees, and moral hazard
I understand the concept of moral hazard. If a government guaranteed all bank deposits 100%, bank customers would simply go to the bank with the highest interest rates and rely on the guarantee that ...
- 241
0
votes
0
answers
17
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Nash equilibrium for tender offers in case of three equal share holders
So the case starts with tender offers from Campeu and Macy's, and go through possible equilibrium in case there are two equal share-holders, or many share-holders:
which shows Campeau's offer is a ...
- 85