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 ...


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

It is recorded under the "Other investment" of the Financial Account. The BPM6, Chapter 6 divides the Financial Account into five portions: Direct investments. Portfolio investments. Financial derivatives (other than reserves) and employee stock options. Other investment. Reserves. "Other investment" (p. 111, BPM6) sounds unimportant , but is actually ...


2

According to the IMF's BPM6, which should be taken as the "most" standard, it is impossible for the BOP to be out of balance. In the IMF BPM6, BOP simply refers to a statistical statement (think of it as a piece of paper or an Excel spreadsheet) that records, in summary form, all of the country's international transactions. The BOP never refers to a number. ...


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

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

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

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 ...


1

I cannot post this as a comment but the question you are asked is to find the equilibrium Y using the LM curve. All the information is given to you here, $M = 100, P = 1, r= 0.025$. This will give you the equilibrium level of $Y$. Think of it this way, the LM curve and the information you are provided gives you the level of $Y$ in this economy, then for an ...


1

One quick way to reason the negative correlation is the concept of Present Value (PV). An increase of interest rate reduces the PV of cash (in-)flows occurring in subsequent periods. in the large, open economy model it is mentioned that higher interest rates encourage both domestic and foreign investors to lend in the country, so investment can ...


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.


1

Your statement "Portfolio Equity is about stocks/shares, whereas Portfolio Debt is about bonds" is essentially correct, with the associated income being dividends and coupons respectively Direct investment (FDI) has the associated income of profits, while other debts may have the associated income of interest (if any) Chapter 6 and other chapters of the ...


1

This is for Micro, entirely based on my own opinion and experience. Syllabus: The most useful topics would be those on production and cost and perfect competition. I see no point of talking about utility theory unless you will be covering intertemporal choice. This and basic demand-supply. If you will be covering ISLM, you might find it a good idea to ...


1

After the Financial crisis of 2007–2008, the inflation's decay became more persistent in many countries. There are several reasons why: The output gap went below zero in developed economies, however, the inflation level decayed moderately only. Changes in the structure of employment. The relative rate of highly educated had increased, therefore, the average ...


1

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-...


1

GNI is simply a new name for GNP. It is GDP plus net primary income from abroad (i.e. with primary income paid abroad treated as negative). Primary income is described in Chapter 11 of the IMF BOP manual GNDI is GNI plus net secondary income from abroad (and similarly secondary income paid abroad is treated as negative). Net secondary income from abroad ...


1

The Balance of Payments is supposed to be a form of double-entry bookkeeping, in that every transaction has two opposite effects, often in different accounts. Hence the word balance. In fact it might be considered quadruple-entry bookkeeping, as there are another two effects on the foreign side too. For a country's Current Account to be in surplus there ...


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

The goal of import quotas is to get people to buy domestic goods, which can only be bought for local currency. Therefore import quotas increase demand for local currency. But... Setting import quotas is a very undesirable economic policy. It is basically a state intrusion into a market economy. Quotas for imports are usually implemented as a desperate ...


1

The question refers to the double-entry bookkeeping principle used in balance of payments accounting. Each transaction must appear twice in the balance of payments, once as debit and once as a credit. An imported good can be paid for by (1) transferring money from a bankaccount in the importing country to a bank account in the exporting country, (2) cash ...


1

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 ...


1

The Roy model ( a much celebrated model in labor economics) deals with this issue. It can be arguably be directly mapped to this issue.


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