7

This is a long comment that is too long for the comment box. In fact, many research projects in US are secretive, especially the ones related to military. At the same time, much, much more research projects in China are secretive, including some agricultural ones, which are not military-related but considered as national security-related by Chinese ...


6

Using corruption is part of it but a bit restrictive way to measure government "quality". You may use aggregate indicators as the one developed by the Worldwide Governance Indicators (WGI) project from the World Bank. They reports aggregate and individual governance indicators for over 200 countries and territories over the period 1996–, for six dimensions ...


5

To elaborate on what has been said in the comments already, using GMM based on Euler Equations generally involves uncertainty that motivates some sort of expected orthogonality between a moment equation and some instruments. Here is a common example of a "Consumption-Based Asset-Pricing Model" (see, for example, Campbell, 1993, 1996) posted by Dave Giles: A ...


4

The intuition for this result is pretty straightforward, and I think one can think about it in terms of saddlepoint stability in a phase diagram, although you don't need any serious technical apparatus - it's all conceptual. Krugman and Obstfeld posit a model in which government expenditure does not affect the "full employment" level of output $Y^f$ (to ...


4

There are some mistakes in your presentation of the Dornbusch model. $𝑝(𝑝∗)$ is the domestic (foreign) price level, $m_s$ stands for nominal money supply, $\bar{y}$ is potential output, These actually stand for the log of price level, log of money supply and log of potential output. In international macro an unwritten rule is that lowercase letters ...


2

In principle it shouldn't really matter that a sub-population (in this case the locals) have capital restrictions, so long as the unrestricted population is sufficiently large. The UIP model only needs that the capital can flow - it doesn't mind who is doing it. In this case, so long as the foreign investors have not completely left, then in aggregate the ...


2

The physical part of trade in goods and services is recorded in the Current Account and the payment (with financial assets) part of the transaction is recorded in the Financial Account. The Balance of Payments should be 0 after you sum up the Current Account balance, the Capital Account and the Financial Account balances. The trade in goods and services is ...


2

This depends on the exchange rate regime. For a floating exchange rate, the balance of payments is always in equilibrium, that is, the financial account always offsets the current (and capital) account. A hypothetical deficit is avoided by a depreciating exchange rate, a hypothetical surplus is avoided by appreciation. For a fixed exchange rate regime, the ...


2

Consider the risk free steady state. In that situation the Euler equation becomes: $$ \left(\frac{C_{t+1}-b \overline{C_{t}}}{C_t-b \overline{C_{t-1}}}\right)^{-\sigma}=\frac{1}{\beta \cdot (1+r)}$$ Which implies $$ \Rightarrow \ln[C_{t+1}-b \overline{C_{t}}] -\ln[C_t-b \overline{C_{t-1}}] = \frac{\ln[\beta] + \ln[1+r]}{\sigma}$$ Assume that in the non-...


2

Blundell, et. al (2014) offer an explanation. According to them, the UK economy experienced a positive labour supply shock over that period. First, they present the facts in a very intuitive fashion (graph taken from the working paper version): They argue that the supply shock was due to two factors: changes in welfare policies that made work more ...


2

As requested in comments: German banks lost a lot of money in the US sub-prime crisis and would have lost a lot more in Greece if the Eurosystem had not saved them. This is what might reasonably be expected if you run persistent trade surpluses: you gain foreign assets which may never be repaid or may be less valuable than you expected The European ...


2

No. In fact the opposite happens. The value of a currency (or the exchange rate) is determined by supply and demand of the currency on the currency market. If country A imports more, the supply of country A's currency will increase more, therefore losing its value. Suppose B's goods are priced in B's currency. Then, the supply of A's currency increases in ...


2

Here are some recent books: Taming Capital Flows: Capital Account Management in an Era of Globalization (2015) Capital Flows and Exchange Rate Management (2013) Managing Capital Flows: The Search for a Framework (2010) Capital rising: how capital flows are changing business systems all over the world (2010)


2

This is a rather big question, and I am only attempting to give a partial answer. (This is perhaps an extended comment.) Firstly, the belief that "market crashes" (in a wide sense) are due to speculative lending activity is an argument that overlaps Hyman Minsky's Financial Instability Hypothesis. This is described in various books of his, "Stabilizing an ...


2

(1) The Phillips curve is not a structural thing, it is not surprising that the relationship between unemployment and inflation is not constant over time. (2) There's a nice AER paper by Simon Gilchrist and coauthors that argues that inflation did not go down as much as in earlier recessions because financially constrained firms needed to keep their cash-...


2

I consider the very rapid growth of infrastructure in the BRIC countries to be a strong driver of the high oil prices (as well as other building commodities) in the mid-2000s. It takes a lot of energy to build roads, mine copper and iron, make cement, etc... I would disagree with two of the implications in the statement: "in the 2000's we witnessed the ...


2

Yesterday I gave an example of an economy based on grains of wheat where the real domestic activities were Plant wheat grains, grow them and harvest them, getting more grains as a result Consume wheat as food Store unconsumed wheat for future planting or consumption In an open economy there are two further possibilities Send wheat grains abroad (e.g. ...


2

The steady state is "symmetric" in the sense that terms of trade with all other countries are equal to $1$, with respect to the home country. It would be non-symmetric if for some of them terms of trade were not equal to unity. Is there anything in the model that precludes this steady state from existing? Usually not. Then it is feasible, i.e. it ...


2

It doesn't seem to me that there were any substantive differences between the Bretton Woods regime and the gold standard, as seen in the early 1970s Note that most of what I'm about to write is summarized from Wikipedia. The gold standard of some form has always existed in the US since the Coinage Act of 1792 with a few interruptions. In 1934, gold was ...


2

This is hard to define because in general in economics the definition of overvaluation of currency is very vague. In economics overvaluation or undervaluation would be a deviation from a person’s expectation of purchasing power parity (PPP) should be (see the textbook Money, Banking and Financial markets from Schoenholtz). So technically if you think that 1 ...


2

It’s derived as follows. First start with original equation. $$(1+i_t)=(1+i^*_t)\frac{S_{t+1}}{S_t}$$ Take natural logs of both sides: $$\ln(1+i_t)=\ln(1+i^*_t)+\ln(S_{t+1}) -\ln(S_t)$$ Now you just use the following: $$s_t=\ln(S_t)$$ And use the well known fact that for small values of $i$ the following approximation holds: $$\ln(1+i)\approx i$$ And ...


2

The term "entrepreneur" is usually taken to mean something more specific than talented and skilled business people. Wikipedia for example gives several definitions, including characteristics such as (with my emphases): creation of value; launching and running a new business; organize the capital, talent and other resources that turn an invention ...


2

One possible flaw in your reasoning is your assumption about what happens to bond prices when there are capital inflows. For example , suppose that the Bank of England has fixed short term interest rates at 1%, and that the yield of 5yr gilts is also 1%. Then there is a sudden unexpected rise in the Bank of England rate to 1.5%, resulting in capital ...


2

These are not synonyms and actually the terms have different meanings (with small overlap), but it is true that many emerging market economies in many settings just happen to be small open economies. Small Open Economy First, open economy is any economy that is open to international trade (see the usage through various textbooks such as Blanchard et al ...


1

It's important to distinguish between reserves, foreign debt and foreign investments. Let's start with pure reserves (of which dollar bills are in essence a component of). Say South American country X no longer trusts their local Peso and decides to use dollars instead. They can sell real wealth to the US (like farm produce) and in return receive dollar ...


1

History is plenty of different situations, but usually it works like this: Low interest rates will increase demand of borrowing money and will decrease the interest of investors in lending (they will probably try to find another place with higher interest rates to invest in). As a consequence, there will be less people offering money, so the interest rate ...


1

In note 1 of the World Investment Report 2017 (page 39), it is mentioned that FDI data may differ from one WIR issue to another as data are continually revised, updated and corrected by the responsible authorities, such as central banks and statistical offices, that provide FDI data to UNCTAD. The last figures are the most accurate ones.


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