38

Very obscure historical example: From 1287 to 1295, the Danish nobleman Stig Andersen Hvide was leading a band of outlaws from the island of Hjelm supported by the king of Norway against the king of Denmark. Stig managed to kidnap expert coin makers and bring them to Hjelm, where they produced counterfeit Danish coins. This allowed Stig and his supporters to ...


29

https://en.wikipedia.org/wiki/Operation_Bernhard (an exercise by Nazi Germany to forge British bank notes. The initial plan was to drop the notes over Britain to bring about a collapse of the British economy during the Second World War. )


12

David Petruccelli writes in "Banknotes from the Underground: Counterfeiting and the International Order in Interwar Europe" In December 1925, a group of Hungarian nationalists were caught trying to put into circulation a large quantity of counterfeit francs in a bid to weaken the French economy and fund irredentist action in Central Europe. Edit: ...


4

Government can have savings while having deficit because we are just talking about savings not net savings. For example, imagine that government has zero tax revenue $\\\$10$ spending and $\\\$10$ of public investment. In this case the government is running deficit of $\\\$20$ yet it is also saving through investment. Due to the deficit being larger than ...


3

Reinhart and Rogoff (2010, RR) claimed that GDP growth is much lower when debt/GDP > 90%. Herndon, Ash, and Pollin (2014, PDF, HAP) placed their errors into four categories: Spreadsheet error: RR omitted Australia, Austria, Belgium, Canada and Denmark from the analysis (apparently a coding error somehow dropped the first five countries when sorted ...


3

There is a nice review from Petra Moser (NYU) on Patents and Innovation: Evidence from Economic History in the Journal of Economic Perspectives (2013). There is another paper on The Choice between Formal and Informal Intellectual Property: A Review, in the Journal of Economic Literature (2014), where the role of innovation is central.


2

Velocity of money is according to the Fed definition: The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. Hence paying taxes/transfers is not ...


2

Unless I misunderstand the question these seem to be complementing events with probabilities $p$ and $1-p$.


2

The paper by Herndon et al. shows that there were "coding errors, selective exclusion of available data, and unconventional weighting of summary statistics". So it's a little deeper than a mere "spreadsheet error" and isn't software-specific, but the term makes good press. Herndon was interviewed on the Colbert Report and I believe that ...


2

You are really asking about the marginal product of a CES production function. The LHS of your second equation is $P * dY/dY(i)$ where $Y_t$ is a CES aggregator of the $Y_t(i)$. Let's define $\rho = \frac{\epsilon-1}{\epsilon}$ so that $Y=[\int Y(i)^\rho]^ {\frac{1}{\rho}}$. Now apply the chain rule to get the derivative (also available for lookup in any ...


2

Depends on what exactly you mean by backward looking component. When people talk about agents being 'backward looking' they often mean adaptive expectations, if that is what you have in mind then answer would be no. However, rational expectations really just require agents to have model consistent expectations (see Snowdon, Vane, & Wynarczyk,(1994). A ...


2

The US Government has $\\\$X$ in spending and raises $\\\$Y$ in revenue. Usually, $X>Y$. So, the US Government (or more specifically the US Treasury) has to cover this $\\\$(X-Y)$ difference (or funding requirement/shortfall). It does so by issuing bonds (or notes or bills) worth $\\\$(X-Y)$. Pretty much anyone is free to buy these bonds, including the ...


2

This is actually one of the more exciting development in DSGE modelling since financial crisis. Including financial sector or friction is definitely a growing area of research and interest. Unfortunately its quite a new development so there are not that many papers yet out there (however if you consider doing research in this field that also means there is a ...


2

This is hard to answer because it is disputable if entrepreneurship is a factor of production just to begin with. There are economists who would argue that any entrepreneurial activity already falls under labor/human capital. Setting the caveat above aside there are two major views on how entrepreneurship as a factor should be treated (see here). In one view ...


2

Beyond Michel De Vroey's book, I know of no other book on the history of macroeconomics, as it is praised by macroeconomists. See for example this review. De Vroey has a true vision of macroeconomics, he shares it with his reader and gives clear guidelines to understand the developments in the field. Anyway, you will find below some nice references that ...


2

There are practical problems with having 'real loan' even though theoretically they would actually be desirable (as paper "The Impact of Inflation on Long-Term Housing Loans" by Tschach, Ingo E.) if they would be practical. We do not know what the current inflation is. This statement is simply incorrect: Of course we will need to know the ...


1

I do not think this answer is definitive, but want to point out that there are two very different regimes: pegged or floating currencies. For a pegged currency, the central bank (or similar body) is attempting to keep the currency value pegged to an external currency or gold. (I am assuming this is a traditional peg, and not a currency board.) A current ...


1

When a bank issues a loan, the money must end up with another bank. Therefore, the banking system as a whole can never lose money. Only the dumb banks which make loans that arent repaid can ever lose money. This premise is incorrect, but it depends upon what is meant by “losing money.” The usual English usage of “lose money” is not being profitable. All ...


1

Recessions are defined as fall in output (usually measured as a consecutive two quarters of negative GDP growth) not loss of money. Output (GDP) might very well fall even when firms are on average more profitable and people earn more money. For example, in the 2020Q2 the median wage in US actually increased according to U.S. Bureau of Labor Statistics, yet ...


1

Here is a graph of labor productivity per hour for the United States since WWII. This is fairly typical of capitalist economies. Even Karl Marx and revolutionary socialists recognize that increasing labor productivity is a general characteristic of capitalism. So yes, the pie keeps getting bigger and bigger as a result of this in combination with population ...


1

What determines interest rates? Let's try to understand the emergence of interest rates from first principles. We'll imagine an island inhabited only by Robinson Crusoe and Friday. For sustenance, they pick coconuts - the only food source available to them. Each coconut can either be consumed immediately or saved up for future use. One day, Crusoe does not ...


1

The answer of Alecos Papadopoulos is excellent, but I have a tiny correction (I wanted to put it as a comment, but unfortunately this forum requires more reputation for commenting than for answering ... funny). You do not need to multiply the constraints by the discount factor. The $\lambda_t$'s would get rescaled by a factor $1/\beta^t$, but when solving ...


1

There's a bunch of things you could look at. Here's a couple: Foreign currency reserves. Does Switzerland have a lot of dollars on hand? If so, there's nothing to worry about, the peg will hold. Switzerland can just buy CHF using dollars, increasing the demand and therefore the price, until the price is back to normal. (CHF is the abbreviation for the Swiss ...


1

I wrote some simple Matlab code which solves a stochastic optimal growth model via Euler function (Coleman policy) iteration, and then again with value function iteration. You can find here. I uploaded it because I also noticed that basically the only other source of code for this stuff is QuantEcon.


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