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Convex transaction costs

Why do we assume convex transaction costs in theoretic models? What is the intuition and the strict definition of this assumption? Well, I have in mind the Glosten model in 1994. Neither he provides ...
2
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0answers
35 views

Log-linear version of current account equation

I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
2
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2answers
87 views

Complementary slackness conditions (Kuhn-Tucker)

Consider the problem of maximising a smooth function subject to the inequality constraint that $g(x) \leq b$. The complementary slackness condition says that $$ \lambda[g(x) - b] = 0$$ It is often ...
2
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0answers
27 views

Mechanism Design and Multidimensional Type Spaces

Is it possible to design a mechanism of agents with multidimensional types? In particular, what if the type space has the following form: $$\Theta_i=\{\theta_i\in\{{1,2,\dots, n}\}\times[0,1]:n\in\...
2
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0answers
64 views

Deriving FOC in OLG model with Cobb Douglas utility

I'm trying to derive the first order condition in a partial equilibrium overlapping generations model. The setup contains both consumption and housing goods. $$ \underset{c_{t+i},h_{t+i}}{max}U_{t}^{...
2
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1answer
72 views

Why do Eurozone members have a commonly higher Debt-to-GDP ratio?

As you could find out from the map, among 22 countries whose debt-to-gdp ratio is above 50%, only 7 are not Eurozone members, and from which only UK is comparably large economical entity. ...
2
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0answers
30 views

Who was the first to model sequential market equilibrium?

As a PhD student the standard macroecononomics education I have received (and continue to receive) revolves around the most realistic model of market structure ive seen to date, that being sequential ...
2
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0answers
21 views

Is there a list of U.S. government regulations or actions that depend on government produced statistics?

I'm interested in compiling a list of government actions that depend on government produced figures. For example social security benefits depend on the CPI. I don't know if such a list already exists.
2
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0answers
43 views

What is the economic meaning of multiple internal rates of return?

Recall that the internal rate of return (IRR) is the discount rate such that the net present value (NPV) of a project is 0. One interesting complexity of the internal rate of return (IRR) is that it ...
2
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0answers
26 views

When does the interest rate parity curve shift?

Given the IS LM IRP model, can somebody tell me the difference for when there is a movement along the IRP curve and when there is an actual shift in the IRP curve?
2
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0answers
75 views

Linearization of the dynamic system (I did it, but I have a mistake that I cannot catch. Help me please)

I have the following dynamic system in discrete time For p is price, d is demand and s is supply. $$p_{t+1}-p_t= a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-ws_t$$ $$d_t= k-gp_t$$ I have to linearize this ...
2
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0answers
46 views

Behavioral Dictator Game

I am doing a self study on behavioral economics and I am trying to solve behavioral version of the dictator game with following utilities for person 1 and 2. $$ u_1( \sigma_1, \sigma_2 ) = \...
2
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2answers
67 views

Why will inflation raise sellers' purchasing power?

According to my textbook, in the chapter on inflation, "When a price rises, buyers of that good must pay more, but sellers get more revenue when they sell it. The loss in buyers' purchasing power is ...
2
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0answers
12 views

Measuring time discount in scheduled services: is there a literature in empirical economics?

Prices might be different, for the same service at some date, if you try to acquire the service two weeks in advance and again at a closer date (e.g. two days prior to the scheduled date), such as ...
2
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1answer
52 views

What would the consequences of an economy-wide 500EUR/tonne carbon tax be?

I recently calculated that Finnish car owners effectively pay 500 EUR per every tonne of carbon dioxide emitted from the tailpipe of a car. This payment is caused by three taxes that are in practice ...
2
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0answers
49 views

Are there really only two main macroeconomic models?

I was told that there are really two broad categories of economic models in macroeconomics. These Being: 1)Neoclassical Growth Models 2)Overlapping Generations Models All other models that exist are ...
2
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0answers
69 views

Question about MWG 17.D.1

I tried to solve by myself the exercises of MWG(Mas Colell). However, I think the exercise has an error at 17.D.1. The 17.D.1 asks us that "verify that there are multiple equilibria". However, The ...
2
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0answers
41 views

utility from providing public good as explained in Hindriks textbook

I think I understood the highlighted part: basically, by increasing $g^1$ my utility increases because more public good is being provided but at the same time it decreases because I have less money to ...
2
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0answers
45 views

Why is there a big change in the money supply at the beginning of each month?

I was watching Argentina's daily change in monetary base for a selected period and there is a clear spike at the beginning on each month. Then during the month it slowly goes down until reaching ...
2
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0answers
56 views

Finding optimal path in continuous time

I have the following optimal control problem $$\max_{c_t,l_t} \int_0^{\infty} [ln(c_t)+\theta ln(1-l_t)]e^{-pt}dt$$ st. $$\dot{k_t}=k_t^{1/2}l_t^{1/2}-c_t-\beta l_t$$ $$k_0>0$$ I do big part of ...
2
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0answers
81 views

Bliss point hamiltonian function

I have the following utility function $$u(c_t)=g(c_t-b)^2$$ for constants $g,b>0$ Edited: in order to be bliss utility function, It must be g is negative. But in the question g is given to be ...
2
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1answer
67 views

How to test if the effect of one regressor entirely comes from other regressors?

I have a regression model that includes IQ test scores as the dependent variable; my own education, my father's education and my mother's education as independent variables. Suppose I want to know ...
2
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0answers
20 views

Linking creeping inflation to industrial revolution

The russian wiki on price revolution says Ползучая инфляция стала тем стимулом, который привёл в конечном итоге к промышленной революции, which translates to in the end result, the creeping inflation ...
2
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0answers
29 views

Software used for solving demands of different functions

I'm currently doing some research on demand systems and have been experimenting with different underlying utility functions which will generate different systems of demands. However I've been doing ...
2
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0answers
29 views

How to go from demand elasticities to a demand function? (merger simulation)

I am reading this paper: https://econpapers.repec.org/article/oupjleorg/v_3a10_3ay_3a1994_3ai_3a2_3ap_3a407-26.htm (Werden and Froeb 1994) about merger simulation. The paper is above my level, so I'...
2
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0answers
27 views

Why would expanding fiat paper issue lead to decreased exports?

I'm reading "A History of Money and Banking in the United States" by Murray Rothbard, and I'm having trouble understanding this one piece of history. Basically, the Massachusetts government issues ...
2
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0answers
62 views

Why are there no minimum wage entry level IT jobs

In the UK, I have not seen any graduate level IT jobs offering a starting salary below £20,000. At the same time, about 10% of computer science graduates are unemployed six months after graduation. ...
2
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0answers
49 views

What's the advantage of DSGE relative to BVARs?

DSGE models and BVARs are commonly used in academia and policy circles. They generate different performances (e.g., in forecasting) and perhaps serve different purposes. Notwithstanding, they have a ...
2
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1answer
69 views

Signaling in zero-sum games?

The foundation of this question is a bit vague (based on something overheard at a conference) but I'm hoping someone here can provide some clarification. I overheard a conversation between two ...
2
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0answers
55 views

Neoclassical Economic Growth Model Shadow Price for Discrete vs Continuous Time

I recently learned about the neoclassical growth model in both discrete and continuous time. The intuitive meaning of the shadow price for both cases is that it represents the value of one additional ...
2
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0answers
20 views

What is the privilege of a primary dealer?

Primary dealers have a privileged position, so there is value in being registered as a primary dealer. - https://economics.stackexchange.com/a/13450/8387 I was previously under the assumption that ...
2
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0answers
22 views

Is there a widely accepted definition of “asset [price] inflation”?

A bit of googling found some conflicting ones... Capel and Houben (BIS) Asset inflation occurs when the prices of financial assets are rising even though they are already above their intrinsic or ...
2
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2answers
99 views

Sen's property $\alpha$ holds when limited attention in choice?

Consider the limited attention choice framework by Matejka and McKay (2015). This framework can give rise to consideration sets, as roughly summarised below. Consideration sets in the limited ...
2
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2answers
118 views

Calculating the amount paid for a loan in today's dollars

So I was trying to figure out the amount paid for a loan in today's dollars using two different methods but they give me different results. I was hoping that someone could explain which method is ...
2
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0answers
27 views

Going from DRMs to Indirect Mechanisms

I have recently started studying mechanism design (after having taken a basic graduate micro course) through Borgers' 'Introduction to the theory of mechanism design'. I was wondering if people are ...
2
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0answers
44 views

Simulating a simple economy with … price-makers? arriving at competitive equilibrium

I'm new to economics and thinking about graduate study. My background is mathematics. I started reading a book on microeconomics by Mas-Colell, Whinston and Green. My goal is to understand how ...
2
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1answer
64 views

The Household Production Function

I was wondering whether someone can explain the household production function (HPF). Specifically, the variant presented in Patanayak et al (2005). The paper uses the HPF to determine household ...
2
votes
1answer
42 views

Data analysis with GARCH modeling

I'm currently analyzing the relationship between stock, bonds, and real estate returns in Germany. I've gathered my data and am planning on estimating this equation: $\sigma_t = \beta_0 + \beta_1 R_{...
2
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0answers
26 views

What changes do I, as an individual, experience during a recession?

There is a lot of talk about how we're approaching an economic recession. There is plenty of talk about how that would affect the world at large, but I haven't really found much on the level of ...
2
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0answers
34 views

How far must one reason up the belief hierarchy?

In games of imperfect information, one must reason about the belief on the state of nature, the beliefs of other player's beliefs of their beliefs, and so on. This is referred to as the belief ...
2
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1answer
98 views

Why does the inverted yield curve occur with US Treasury securities?

I have always thought that US securities were considered nearly risk free as the government will almost always pay them back. So why is it the case that investors currently view short term securities ...
2
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0answers
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 ...
2
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0answers
29 views

What do the excess supply and demand numbers in this chart mean?

From Econ 101, I thought markets are supposed to equilibrate so that there isn't any excess supply or excess demand. But from a WSJ story, we have the chart below. I believe it says, for example, ...
2
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0answers
59 views

How does the Fed choose its asset purchase rate in an ample reserves era?

The St. Louis Fed's article "A New Frontier: Monetary Policy with Ample Reserves" states that the Fed now uses the IOER and ON RRP rates to set the FFR, instead of open market operations, which are no ...
2
votes
1answer
74 views

Incomplete information in multi stage game

I would like to solve a game where firms have private information about their own type, but only know the distribution of the other firm's type. They interact in two stages, where the strategies ...
2
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0answers
42 views

If an endogenous explanatory variable is serially correlated does it mean that its lags are also endogenous?

in panel data when examining economic growth determinants lags are often used to account for endogeneity of explanatory variables. However if the explanatory variable is serially correlated, does it ...
2
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0answers
26 views

What is the relationship between economic growth and equality?

Does economic growth create more or less equality?
2
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0answers
34 views

Regression analysis with interaction and decomposed main effect

I'm trying to figure out if I need to include the main effect in a regression analysis with an interaction if I am already including a decomposed version of the main effect. For example, let: ...
2
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0answers
70 views

Estimating CES utility (not production) function parameters

The CES utility function has the form \begin{equation} u(x_1,\dots,x_n)=\left[\sum_{i=1}^n\alpha_ix_i^\rho\right]^{1/\rho}, \end{equation} where $\alpha_i$ is the consumption share parameter and $\...
2
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0answers
14 views

The range of subsidies that underpin China’s economic model

I was watching the news the other day and the reporter said that America was complaining about "the range of subsidies that underpin China’s economic model". What exactly are those subsidies?

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