New answers tagged

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Can models and simulations based on economic data predict when China's economy will overtake that of the United States? Trivially yes, the source you cite shows a model with one such prediction. And what effect did the outbreak of coronavirus have on the predicted outcome? China was growing faster than US before Covid pandemic, those CEBR estimates show ...


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When insignificant (not significantly different from $0$), we should never interprete the sign and magnitude of the estimated coefficient. Because, with high probability the sign of the coefficient could be the opposite to the estimated one, and the magnitude of the coefficient either much smaller or much higher. The estimations are specific values taken by ...


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answer to new edit If the coefficient is not significant then you cannot reject the hypothesis that true coefficient is zero. In that case, magnitude or sign of the coefficient is not very relevant. You could still care about it a bit because if you find large coefficient with sign you would expect to find, it might be that it is insignificant only because ...


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It is actually not used widely in inequality research nowadays, but in the past it was used because it was argued that most people deriving labor income are poor, whereas most people deriving income from capital are rich. As a result increase in the capital share of income would imply that the ‘rich’ get larger share of total income and thus inequality is ...


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In addition to the other good answers here, I want to address the assumption that the mere existence of gold coins will do away with paper money, and implicitly do away with fractional reserve banking. When you deposit money in a bank the bank lends it out at interest, thus converting a short term loan by you to the bank (your deposit) into long-term loans ...


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This should probably be in another forum, but I don't know which one, so I am answering it. The word "stock" meant inventory originally. Stock still means inventory for a store. In Amsterdam, there were joint ventures where different vendors brought different inventory to a store. They received a certificate showing that they owned a certain ...


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One of the most fundamental distinctions in economics is that between stocks, measured at a point in time, and flows, measured over a period of time or as instantaneous rates. The construction of dynamic economic models naturally leads to differential equations in which the rate of change of a stock variable depends on one or more flow variables. An example ...


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In a graph you linked, the durables spending FRED series PCEDG is 1968 versus 1550 (Aug 2021 versus pre-pandemic Feb 2020, a span of 18 months). That is +27%. The PCE price level series PCEPILFE that excludes food and energy shows levels of 118.1 versus 113.2, so +4.3% over 18 months. The U.S. is not a net importer of food and energy. Currently there is ...


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Are these terms are even being introduced to the students in the bachelor's or even master's degree frame of study? Students do study moneyless economies, in fact that is the starting point of studying economics (e.g. see textbooks like MWG Microeconomic Theory). MWG is graduate level text but undergraduate texts such Microeconomics and Behavior by Frank ...


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In mathematical models of economies (e.g., exchange economies), it is not necessary to include money. Prices do turn up as mathematical constructs ("shadow prices"). Modern economies have money to simplify trade - barter is difficult. You can specify in these models that the interest rate has to be zero. The credit market will most likely not "...


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The correct rate for present value calculations is the discount rate. The inflation rate is inferior because it does not allow for other considerations such as risk. A quoted "interest rate" is context dependent so it cannot be evaluated by the magnitude of the rate alone. Which person or organization is quoting the rate? Is it wise to rely upon ...


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Fiat means "decree". William F. Hummel, a retired engineer, in the recent past published articles on money and credit systems. He has since retired from public discourse. This is an entry which discusses the evolution from a gold standard to so-called fiat money in the United States (when the State makes gold or silver coin the metal standard this ...


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First correction of various misconceptions: Since Nixon went off the gold standard the U.S. dollar has been a fiat currency backed by federal debt. U.S. dollar is not backed by federal debt, and in general fiat currencies by definition of the word are not backed by anything (see Wallace 2017). Also, generally if money is backed by something it has to be ...


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The only time you must exclude multicolinear variables is when one is a perfect linear combination of the other. Excluding in other cases is more of a rule of thumb - if the Variance Inflation Factor (VIF) is greater than 5 you may want to exclude the problematic variable. $VIF = \frac{1}{1-R^2}$ where $R^2$ is from the regression of all other dependent ...


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I think a picture would best convey the intuition. The red line in the graph below shows a linear trend, the blue piece-wise linear, and the green exponential.


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The PWL (piece-wise linear) model replaces a curve with a sequence of straight line segments joined together to approximate the curve. I am not familiar with the use of PWL in economics, however, it is the same principle used in science and engineering. This two page reference shows a PWL for a model rocket motor: https://www.nar.org/SandT/pdf/Estes/A10-0T....


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I find "horizontal axis" better than x-axis, because it does not use the name of a potential variable. However, I think your whole sentence focuses to much on what we see, and not on the actual phenomenon/statistics. I will try to get the impression across by exaggerating it: "Once the squiggly line turns blue, it usually stays below the ...


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It's possible, as follows. Let's assume you make the GGG currency. So people come to you and give you $1 and you give them one GGG (assuming people want the GGG, that is). After a while there are X GGG in circulation and you have X dollars. Later, if someone would rather have dollars, they give you Y GGG and you give them Y dollars. Note: if everyone decides ...


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This is impossible. You want a currency whose exchange rate to all other currencies is fixed. Say that today 1 USD = 0.86 EUR. You are asking for a new currency GGG where 1 GGG = 1 USD, and 1 GGG = 0.86 EUR, always and forever. Let's suppose the USD crashes so that 1 USD = 0.001 EUR (1000 USD = 1 EUR). Let's suppose I'm stuck with 100,000 worthless USD. It's ...


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Confidence intervals (CI) exist within the `frequentist' tradition of statistics/econometrics. In the very loosest sense, frequentism takes the perspective that there is some true parameter out there. CI's are a representation of this school of thought. CI's should be interpreted as saying that: "upon repeated random sampling from the population, we ...


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The same reason that oversupply leads to falling prices in any other market. There is a huge amount of money out there, and a lack of good returns with adequate levels of safety, so money is cheap. The reason this leads to negative rates is that money, like other goods, has a carrying cost. Keeping physical cash requires heavily secured real estate and is a ...


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You could search on Google Scholar and restrict the range to end in 2019, thus avoiding all Covid-19 related literature. Some results for the range 1990-2019, keywords "vaccine openness education level": Lee et al. (2017): Personality and demographic correlates of New Zealanders’ confidence in the safety of childhood vaccinations Browne et al. (...


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If there is inflation, what is your alternative? If you do not lend, your money loses even more of its value. A numerical example: If inflation is 5% and you can lend at 2% nominal interest rate, you can make the loan and lose 3% of your money's purchasing power OR you can not make the loan and lose 5% of your money's purchasing power. Poor choices, but ...


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Imagine there is no Federal Reserve. It's easy if you try (because the Fed did not exist prior to about 1914). When the federal government operates in a world without the Fed the Treasury department would collect taxes, fees, and other receipts into commercial bank accounts due to the federal govt called Treasury Tax and Loan Accounts (TTL). The net sale of ...


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Can the Federal Reserve permanently decrease money supply? Yes it can. For example, if Fed created extra \$1000 by buying \$1000 US bond or treasury bill in exchange for newly created money, then Fed can always reverse this process by either just waiting for the bond to be repaid. When the face value of bond is being repaid government has to somehow pull \$...


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In simplified and intuitive way: Consistency is ability of the estimator to on average uncover true value of the coefficient. For example, if the true value of some coefficient $\beta=2$ then estimator $E[\hat{\beta}]=\beta=2$ as well. An estimator that in expectations would not give you the true beta coefficient would not be consistent. Efficiency is the ...


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Firms can always shift their profits from one tax territory to another via various methods. Consider a simplistic example, let’s say we have firm ABC that has most of its business in Sweden. The owners of ABC can set up another parent company, let’s say ABC global in some tax haven like Luxembourg. Afterwards they can transfer some intellectual property (or ...


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No, here the correct interpretation would be that on the average the treatment led to 0.5 decrease in number of rich people per million, conditional on all other covariates. Here (I am adding t subscript because I think you must have omitted it): $$-0.5=\beta = E[Y_{it1} -Y_{it0}]$$ There is no per year there, this is one off effect that reduces the amount ...


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Consider a regression with a dummy variable: $$ y_i = \alpha + \beta D_i + \varepsilon_i. $$ Then $\beta$ will be identified by: $$ \mathbb{E}(y_i|D_i = 1) - \mathbb{E}(y_i| D_i = 0) = \beta $$ Whether I should use log for this outcome variable because I am not sure it is a ratio or actual value (ratio to me normally percent, not per million like that)? It ...


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