texts: Difference between Income-Expenditure Identity and the Goods Market Equilibrium condition

texts: Is there any difference between the Income-Expenditure Identity and the Goods Market Equilibrium condition. Both are $Y=C+I+G+NX$. If it is an identity, why do we solve for the equilibrium output? Shouldn't it always hold? If someone could clarify this it would be very helpful.


texts: Does the envelope theorem hold at a corner solution?

texts:
Suppose we have the following production function:

$$F(L,K)=\max_{L_K}H(L,L_K,K)=\max_{L_K}\left[(L-L_K+1)^\alpha(L_K+K)^{1-\alpha}\right]=(L-L_K^*+1)^\alpha(L_K^*+K)^{1-\alpha}$$

With the constraint $L_K\in[0,L]$.

We know that $$\frac {dH}{dL_K}=\alpha(L-L_K+1)^{-1}H+(1-\alpha)(L_K+K)^{-1}H=0$$
Hence the value for $L_K$ at which the derivative is zero is $L_K^0=\frac {(1-\alpha)(L+1)+\alpha K}{1-2\alpha}$. And the optimal value $L_K^*$ is:
$$
L_K^*=\begin{cases}
L_K^0 &\text{ if } &0<L_K<L &(1)\\
L&\text { if } &L<L_K^0&(2)\\
0 &\text { if } &L_K^0<0 &(3)
\end{cases}
$$

It is clear that if $L_K^*\in(0,L)$, (case $(1)$ ), then the envelope theorem holds:

$$\frac d {dL} F(L,K)=\frac \partial {\partial L}H(L,L_K^*,K)=\alpha(L-L_K^*+1)^{-1}\cdot F(L,K)$$

Moreover, in the third case (3), it is also clear to me that the envelope theorem holds. However, I am not so sure about the second case (2). I would say that the envelope theorem does not hold in this case, because if we substitute $L_K^*$ back into the original production function, we get
$$F(L,K)=1^\alpha(L+K)^{1-\alpha}$$
And the derivative with respect to $L$ in this case is
$$ (1-\alpha)(L+K)^{-1}\cdot F(L,K)$$

For the envelope theorem to hold in case 3, this would require $\alpha= (1-\alpha)(L+K)^{-1}$, which Almost-Always doesn't hold.

But the reason this confuses me is that in this question I was referred to this paper, which has a theorem that states:

So my question is:

Am I right that the envelope theorem doesn't hold when $L_K$ is at a corner solution?
Does this contradict the theorem, or do I misunderstand the theorem? If not, is the theorem correct?


texts: Usefulness of the value for the slope of the demand curve

texts:
I see the elasticity value(s) of demand being used frequently to determine the relation between demand and variables such as price and income. I have however been unable to find any uses for the slope of the demand curve. Are there any?

Also, is there any relationship between the slope and the elasticity?


texts: Convert USD2005 PPP per-capita GDP to USD2011 PPP per-capita GDP for a number of countries

texts:
Which conversion factor / formula should be used to convert USD2005 PPP per-capita GDP to USD2011 PPP per-capita GDP for different countries?

I have found an identical question, but without a clear, satisfactory answer here:
Conversion of GDP PPP International \$ 2005 into GDP PPP International \$ 2011


texts: Data on inflation target on different countries around the world

texts:
Does someone know if there's a page, like a "global bank" online page, where one could see the inflation target for different countries?
For example, in x country, for x' year, the inflation target is $x''\%\pm 1$.
I know that this information can be found on the different central bank's online pages for each country, and if one would like to know about them, then one would need to check each page of them, one at a time.
Thank you in advance.


texts:
Assume $x_t$ is an unit root process. Write first difference of $x_t$  as

$\Delta x_t$ =$\rho$ $\Delta x_{t-1}$+ $\epsilon_t$

Where $\epsilon_t$ is a white noise process.

How can we calculate $ E_t [x_{t+j}]$ when $j \rightarrow \infty$.

Suppose:

$a_t$= $x_t$ +$z_t$

$\Delta x_t$ =$\rho$ $\Delta x_{t-1}$+ $\epsilon_t$

$ z_t$ =$\rho$ $z_{t-1}$+ $\eta_t$

How can we calculate $ E_t [a_{t+j}]$ when $j \rightarrow \infty$.


texts:
I have seen min{x1,x2} functions representing perfect compliments but have never seen a max{x1,x2} function anywhere in my book or lectures, I also have never seen anything about p1 not equaling p2. can anybody give me some insight to this problem.

Consider a consumer with a utility function U = max{x1,x2} the consumer faces prices p1 and p2 for goods 1 and 2, respectively, and has an income of m dollars. (assume throughout p1 dne p2).  His optimal consumption solves the standard problem.

a)Find the optimal levels of consumption for goods 1 and 2 as a function of income and prices.
b) is good 1 a normal good?
c) Are goods 1 and 2 complements or substitutes?
any help would be much appreciated


texts: Which Gini is more reliable, CIA or World Bank?

texts:
I would like to ask you a super-basic question.

I need to use Gini coefficient as moderator to examine well-being, resilience and other variables in Immigrants.

Which Gini index is more reliable or popular to use among professional economists, World Bank's or CIA's? Either way, the most recent year are varied depending on countries. How do you deal with it?

Thank you for your advice!


texts: Theory behind financial flows not going to the most developing nations even though they have the highest growth rates

texts:
I remember reading a bunch of articles on this a few years ago, but I can't find any of the references any more.

It has been a while since I looked at this, so here is a rough paraphrase of the theory and I was trying to find some good references for it. Basically there is a theory in development economics or economic growth where financial flows should go to the areas with the most potential economic returns, which usually means developing nations. But if I remember correctly, this result is not visible in the actual financial flows data, where most financial flows remain within developed nations. So the argument was that there is more to be gained from money flowing or concentrating in some higher returns industries within developed nations, rather than flowing to places which in principle might have higher returns.

Like I said, this is a very rough paraphrase to the point of being inaccurate. But if anyone know what this theory is called or the latest work in this area, that would really be appreciated.


texts: How did downgrading bonds contribute to Greek crisis?

texts:
According to an article I read, one of the steps that was used to contribute to the Greek downfall was that bankers downgraded the bonds of the country. This immediately makes the interest rates (“yields”) on the bonds go up, making it more and more expensive for the country to borrow money or even just roll over the existing bonds.

I don't understand the impact this has.  Why it makes it more expensive for the country to borrow money?  And what is "roll over existing bonds"?

Also what are the warning signs in the economy that this is happening?  Is a weak currency one sign?


texts:
This question relates to a specific paper by Eric Budish, published in 2011 in JPE, but I've tried to put all relevant information in this question. On page 1072, he defines budget constraint hyperplanes as follows:

  Let $H(i,x) = \{\mathbf{p}:\mathbf{p} \cdot x = b_i \}$ denote the
  hyperplane in $M$-dimensional price space along which agent $i$ can
  exactly afford bundle $x$. As prices cross $H(i,x)$ from below, bundle
  $x$ goes from being affordable for $i$ to being unaffordable for $i$.

$\textbf{p}$ represents a price vector for the $M$ goods, which, importantly, are indivisible. $b_i$ is agent $i$'s budget. I think the rest is sufficiently self-explanatory. My confusion is with this subsequent statement:

  Importantly, the number of such hyperplanes is finite because the
  number of agents and the number of bundles are finite. This is an
  advantage of having only indivisible goods.

This I don't see. For example, suppose $M=2$. Then aren't all $\textbf{p}=(\alpha b_i, (1-\alpha)b_i)$ such that $\alpha \in [0,1]$ hyperplanes meeting that definition, and thus I have infinitely many?

Having said that, a hyperplane is the set of those price vectors, not each of the vectors, so maybe the full set of price vectors I've just described together define just one hyperplane? I suppose my issue is understanding what a hyperplane is in this setting, and how the indivisibility gives us just a finite set of hyperplanes to work with. Any guidance would be very much appreciated.


texts: Contract theory: Incentive contracts (when agents have multiple tasks) models by G. Baker and Holmstrom & Milgrom

texts:
So my question is the following:

In both Baker's (2002) and H & M (1991) models we have a problem that a principal is trying to design a stimulating contract in such way that the agent will choose such an effort that maximizes his utility or profit.

The contract usually looks like this: W = s + b * V(agent's_effort, some_stochastic_stuff).
s - is, of course, some base payment.
So the goal is to find the right "b".

In both models the first step is to find a "Best response function" of an agent - his choice for an effort vector in response to any value of "b".
Great, no problems with that.

But then happens the magic (for me at least).

The next step in both models is to maximize the total surplus of agent and principal:
EUagent + EProfit -> max for 'b' subject to {effort is a function of 'b'}.

So the thing that is a mystery for me here is why do we maximize total surplus? Isn't it me logically correct to maximize the principal's Expected profit since that him who is designing the contract....

Of course I understand that those models are classic, there cannot really be a mistake by authors, but I really cannot get the logic here...

If someone could shed some light over this, it would be quite great!

Thanks a lot in advance...


texts: Relation between growth rate of GDP and real interest rate for sustainable debt-to-GDP ratio

texts: Why is the relation between the growth rate of GDP and the real interest rate important for sustaining the government the debt-to-GDP ratio ?


texts: Estimation technique: Independent variable (taxation) unknown

texts:
I am trying to estimate $\lambda$ from this equation:

$(1+ t_t) = \left(\dfrac{C_t}{Y_t}\right)^{\frac{1-\lambda}{\lambda}}$

After taking logs and approximations, I get:

$t_t \approx \left( \frac{1-\lambda}{\lambda} \right)(\ln C_t - \ln Y_t) $

I can get data on the consumption (C) and GDP (Y), but I wasn't sure about what to do with the taxes (t) and asked my professor about it, and this is what I heard back:

" ... won't need to estimate the tax level.  The tax is basically a proxy variable for capital market frictions.  If you assume that it is a function of the difference between domestic consumption and domestic income (in logs) then you need only data on those variables, not on any tax rates. ..."

I was wondering whether you would happen to know of any techniques that I can use here for estimating $\lambda$? GMM or MLE or whatever helps, without needing to get data for $t_t$.


texts: Question about tariffs in Henry Hazlitt's Economics in One lesson

texts:
I've been reading Henry Hazlitt's Economics in One Lesson and he said something about free trade and tariffs that I don't quite understand.

He uses the example of buying cheaper English sweaters over more expensive domestic sweaters. He says, "By buying English sweaters they furnish the English with dollars to buy American goods here. This is in fact the only way in which the British can eventually make use of these dollars."

I guess this another way of saying current account deficit = capital account surplus. That makes sense. What I don't understand is why importing goods from other countries necessitates that they invest that money back in the US. In his example, why are we able to pay other countries in American dollars instead of, say, British pounds, but the British are only permitted to pay the US in US dollars?

I hope this question makes sense. Thanks for any clarification you can provide.


texts: Will inflation rate be the same if we use different base year?

texts:
I saw this chart where CPI for 2003 is 1.84, for 2004, is 1.889. I dont know the base year because its not in the chart. But base year has to have CPI of 1.

If we instead use 2003 as base year, is the inflation rate during 2003-2004 period, going to be different?


texts: Are there any Sovereign Debt Guarantees, apart from those issued by the US?

texts:
The US has been undertaking an irregular form of foreign aid, Sovereign Bond Guarantees, which entails guaranteeing some of the public debt of their allies, source here: https://www.cgdev.org/blog/whither-us-sovereign-bond-guarantee-program
The entire idea is that some states cannot access financing because they are not perceived as trustworthy, stable, or established enough. This creates a negative spiral, as high interest rates increase the probability of default. Guaranteeing the debt is bound to decrease the interest rate, making financing much easier and cheaper.
My question is: Has any other state done anything like this before? Who, when, where? Guarantees of private debt are common, but are there any other cases of state debt being guaranteed?
Is this an efficient form of foreign aid?


texts: Log-linearization of CES production function

texts:
I am trying to recover the Log-linearisation of a CES production function in a paper. Although I am fairly confident with Log-linearisations, I simply do not find the supposed result.
The production function:
$Q_t = \Bigg[(1-\mu)^{\frac{1}{\epsilon}}\bigg(\big(\frac{K_t}{\alpha}\big)^{\alpha}\big(\frac{L_t}{1-\alpha}\big)^{1-\alpha}\bigg)^{\frac{\epsilon-1}{\epsilon}}+(\mu)^{\frac{1}{\epsilon}}(M_t)^{\frac{\epsilon-1}{\epsilon}}\Bigg]^{\frac{\epsilon}{\epsilon-1}}$
The log-linearization:
$\hat{q}_t = \alpha(1-S_M) \hat{k}_t + (1-\alpha)(1-S_M)\hat{l}_t + S_M \hat{m}_t$
where ($S_M = \frac{M}{Q}$)
My approach so far:
$(Qe^{\hat{q}_t})^{\frac{\epsilon-1}{\epsilon}} = \Bigg[(1-\mu)^{\frac{1}{\epsilon}}\bigg(\big(\frac{Ke^{\hat{k}_t}}{\alpha}\big)^{\alpha}\big(\frac{Le^{\hat{l}_t}}{1-\alpha}\big)^{1-\alpha}\bigg)^{\frac{\epsilon-1}{\epsilon}}+(\mu)^{\frac{1}{\epsilon}}(Me^{\hat{m}_t})^{\frac{\epsilon-1}{\epsilon}}\Bigg]$
$(e^{\hat{q}_t})^{\frac{\epsilon-1}{\epsilon}} = \Bigg[(1-\mu)^{\frac{1}{\epsilon}}\bigg(\big( \frac{K^{\alpha}L^{1-\alpha}}{Q}\big) \big(\frac{e^{\hat{k}_t}}{\alpha}\big)^{\alpha}\big(\frac{e^{\hat{l}_t}}{1-\alpha}\big)^{1-\alpha}\bigg)^{\frac{\epsilon-1}{\epsilon}}+(\mu)^{\frac{1}{\epsilon}} (\frac{M}{Q})^{\frac{\epsilon-1}{\epsilon}} (e^{\hat{m}_t})^{\frac{\epsilon-1}{\epsilon}}\Bigg]$
$\frac{\epsilon_Q-1}{\epsilon} (1+\hat{q}_t) = (1-\mu)^{\frac{1}{\epsilon}} (1-S_M)^{\frac{\epsilon-1}{\epsilon}}\frac{\epsilon-1}{\epsilon}(\hat{k}_t+\hat{l}_t)+(\mu)^{\frac{1}{\epsilon}}S_M^{\frac{\epsilon-1}{\epsilon}} \frac{\epsilon-1}{\epsilon}(1+\hat{m}_t) $
$(1+\hat{q}_t) = (1-\mu)^{\frac{1}{\epsilon}} (1-S_M)^{\frac{\epsilon-1}{\epsilon}}(\hat{k}_t+\hat{l}_t)+(\mu)^{\frac{1}{\epsilon}}S_M^{\frac{\epsilon-1}{\epsilon}} (1+\hat{m}_t) $
What is irritating me the most are the remaining $\epsilon$ in the powers of the factor shares. Any hint on how to go further?


texts:
The rules for including a stock in indices such as S&P 500 are common knowledge, so everyone can know when e.g. company B is going to enter the index instead of company A. Since ETFs and mutual funds tracking the index have to buy shares of B and sell shares of A, this can potentially used by speculators who would try to quickly buy B and sell it to the ETFs in a high price, while buying A in a low price from the ETFs. Does such kind of speculation have any effect on the stock prices?

Specifically: Suppose someone invents a new index, X&Y 500, in which the identity of the companies is kept secret and revealed only to issuers of ETFs and mutual funds. All other things being equal (e.g. the companies in both indices are equally strong, have the same business potential, the volume of ETFs of both indices is the same, etc.), will the secret index X&Y 500 perform better than the revealed index S&P 500?

EDIT: To make the question even more focused, assume that there is no way to know in advance which stocks are going to enter/exit S&P 500 (e.g. these stocks are selected at random). So the difference between S&P 500 and X&Y 500 is that the stocks in the former are revealed to all traders at the same time, while the stocks in the latter are revealed only to ETF issuers.


texts: Can there exist something that subsidises that is not a subsidy

texts:
Is the set of subsidies exactly the same as the set of things that subsidise?

Put another way: can there exist something that subsidises that is not a subsidy?

Or are there two definitions of a subsidy: the narrow economic definition, and a wider definition that includes (for example) everything that has the effect of a subsidy.


texts: Is there a reference that plots different countries' debt-to-GDP ratios over (long) times?

texts:
This old blog post has an interesting plot that demonstrates that the U.K.'s current debt-to-GDP ratio is significantly below its very-long-term (180-year) average.

Is there a plot anywhere that compares the historical debt-to-GDP ratio over long times between countries? Ideally, I would like a single plot that (a) has multiple time series for many different countries (using comparable methodology), to make it easy to compare across countries, and (b) goes back before World War II, in order to show extremely long-term trends. However, a bunch of different separately plotted long-term time series would also be interesting. But a quick search doesn't turn up much that goes back before around 1970.

More broadly, was it common for debt-to-GDP ratios to exceed 1 year before and during the Bretton Woods system? Or was the U.K. unusual in this regard?

Or is it just the case that we don't have any reliable numbers for debt-to-GDP ratios from before the rise of modern econometrics?


texts: What will happen to bank loans in the event of hyper inflation?

texts:
Say for example a person gets a home loan of $100,000 in a certain country at an interest rate of 10%. Inflation is normally around 5% in this country.

What could happen to that person's loan if the country's inflation rises to say 1000%?


texts: Pareto efficiency (optimality conditions) in simple New Keynesian model

texts:
I am looking for the pareto-optimal equilibrium for a central planner's problem in a simple New Keynesian model. The planner's problem is to choose $\{ C_{t}, H_{t}, Y_{t}, \pi_{t}, \{h_{t}(j)_{j=0}^{\infty} \}, \{y_{t}(j)_{j=0}^{\infty} \} \}_{t=0}^{\infty}$ to maximize $$ U_{0} = E_{0} \sum_{t=0}^{\infty} \beta^{t}u(C_{t}, 1-H_{t}) $$

subject to: $$ C_{t} = (1-\frac{\emptyset}{2}\pi_{t}^{2})Y_{t} $$ $$ Y_{t} = \ [\int_{0}^{1}y_{t}^{\frac{\epsilon -1}{\epsilon}}(j)\;dj ] ^{\frac{\epsilon}{\epsilon-1}} $$ $$ y_{t}(j) = A_{t}h_{t}(j) $$ $$ H_{t} = \int_{0}^{1} h_{t}(j) \; dj $$

The first-order conditions for this problem imply that for all $j$ and $t$: $$ \frac{u_{l}(C_{t}, 1-H_{t})}{u_{c}(C_{t}, 1-H_{t})} = A_{t} $$ $$ y_{t}(j) = Y_{t}$$ $$h_{t}(j) = H_{t} $$ $$ Y_{t} = A_{t}H_{t} $$ $$ \pi_{t} = 0 $$ $$ C_{t} = Y_{t} $$

To arrive to the above implications I tried setting up the following Lagrangian:
 $$ L_{0}(j) = E_{0} \sum_{t=0}^{\infty} \beta^{t} u(C_{t}, 1-H_{t}) + \lambda_{t}[(1-\frac{\emptyset}{2}\pi_{t}^{2})Y_{t} -C_{t}] + \mu_{t}[\ [\int_{0}^{1}y_{t}^{\frac{\epsilon -1}{\epsilon}}(j)\;dj ] ^{\frac{\epsilon}{\epsilon-1}} - Y_{t}] + \omega_{t}[A_{t}h_{t}(j)- y_{t}(j)] + \alpha_{t}[H_{t} - \int_{0}^{1} h_{t}(j) \; dj ] $$

to obtain the FOCs:

$$ \frac{\partial L_{0}(j)}{\partial C_{t}}: u_{c}(C_{t}, 1 - H_{t}) - \lambda_{t} = 0    $$
$$ \frac{\partial L_{0}(j)}{\partial H_{t}}: -u_{H}(C_{t}, 1 - H_{t}) + \alpha_{t} = 0 $$
$$ \frac{\partial L_{0}(j)}{\partial Y_{t}}: \lambda_{t}(1 - \frac{\emptyset}{2}\pi_{t}^{2}) - \mu_{t} = 0$$
$$ \frac{\partial L_{0}(j)}{\partial \pi_{t}}: -\emptyset \pi_{t} Y_{t} \lambda_{t} = 0 $$
$$ \frac{\partial L_{0}(j)}{\partial h_{t}(j)}: \omega_{t}A_{t} - \alpha_{t} = 0 $$
$$ \frac{\partial L_{0}(j)}{\partial y_{t}(j)}: \mu_{t}[\int_{0}^{1} y_{t}^{\frac{\epsilon -1}{\epsilon}}(j)]^{\frac{1}{\epsilon -1}} y_{t}^{\frac{-1}{\epsilon}}(j) - \omega_{t} = 0 $$

Now, I have no idea what I am doing wrong or how to get to the implications above. Any help would be very much appreciated!


texts: Quarterly industry-level productivity growth?

texts: Are there any quarterly data on industry-level productivity growth (i.e., by NAICS code) in the United States? I've looked around for a while but haven't been able to find anything. BLS publishes aggregate productivity growth quarterly, so I find it hard to believe that there isn't a breakdown by industry.


texts: Relationship between default risk and value of bond

texts:
In particular Mortgage-backed securities. I've read from a book that underestimating the risk of default is tantamount to overestimating the value of the bond, giving rise to a bubble in MBS. I'm unclear of how that works.
My guess is that since the probability of default risk is low, thus banks give out lower coupon rates. Investors buy MBS up because they are safer, demand for MBS increase, price of these MBS pushed up.


texts: Are there agreements in place between the EU and the US to facilitate trade in services?

texts: What agreements are in place between the EU and the US to facilitate trade in services?


texts:
How to create an economic model? What are the step for this?
Is it need a real data for this? Or generating a data is acceptable?
If possible, I want to know the step by step for creating a mathematical economic model.
(Ps: What I ask is the general guidline for create a model.)
Sorry for my bad English.


texts: How and when did the public learn of monetary policy changes before FOMC announcements and press conferences?

texts:
I've been reading about the Federal Open Market Committee's announcements of monetary policy decisions, specifically the time at which the announcements are made and then how the markets somewhat immediately respond. However, FOMC announcements are a relatively recent thing, as they appear to have only started regularly in ~95 or so (press conferences are even more recent). It seems like from 1996-2013 they made an announcement after the end of every meeting at 2:15, and from 2013-present they changed it to 2:00 for some reason.

What about before 1994/5 though? How did the public learn of the monetary policy changes, and how soon after the FOMC meetings did a majority of people learn what the policy changes, if any, were?


texts: Taylor Series Approximation around steady state in Solow

texts:
In my Advanced Macro script, the professor says take TSA1 of the following equation:

$(1+g)(1+n)k_{t+1} = sk^\alpha_{t+1} + (1-\delta)k_t$

where $g$ is technological progress, $n$ population growth, $k$ capital per effective labour (AL).

In the class we work with discrete time. The results don't seem to make sense to me - could anyone guide me how to take the TSA in this particular case?

The $k_{t+1}$ means subscript and thus capital per AL at time $t+1$.

EDIT: TSA around the steady state.

Many thanks!


texts: How to calculate GDP increase using Cobb-Douglas production function?

texts:
I use this economics stack exchange for the first time. I have a question regarding the Cobb-Douglas production function. The question is this: GDP in an economy is growing at 3% a year in real terms. Population is constant. The government decides to allow a significant increase in immigration so that the population (and the workforce) starts to grow by 1% a year. Output is produced in the economy according to a Cobb-Douglas production function. The share of labour income in GDP is 70%. How much higher will GDP be as a result of the new immigration policy after 20 years? How much higher will GDP per capita be?

I am not be able to understand how to use the function in this problem. Sorry if I put a question in a wrong way. Thank you.


texts: Calculating a cross price substitution/income effect

texts:
I am given a utility function $U(x,y)$, income $I$ and prices $p_x,p_y$. Then the price of $y$ rises to $p_y' = 3 \cdot p_y$. How are we supposed to calculate the substitution effect and income effect on the demand for x?

I performed a standard Slutsky decomposition, but I mistakenly began with the precondition $x_0 = x_1$.  Of course, this meant that the $∆x^s$ and $∆x^i$ were all screwed up (there would be no intermediary step if the beginning and end were the same).  I know that substitution/income effects are calculated from relative price changes, so would an alternate approach be to treat the tripling of $p_y$ as equivalent to multiplying $p_x$ by $1/3$?  And then simply proceeding from there?

Edit: Due to popular demand, here is a rephrasing of the essence of my question:

How is a Slutsky/Hicksian decomposition calculated under a cross price change ($p_y$ changes, affecting $x$, for example.)?  An algebraic walkthrough given a Utility function: $x^{a}y^{1-a}$ and a budget line $P_xX+P_YY = I$, and a given $I_0$ would be helpful.


texts:
It is already known that China and Japan are the biggest owners of US debt - about one trillion dollars each.
But who are the biggest owners of China debt? I mean the foreign owners.


texts: opportunity cost when inside production possibility frontier

texts:
I am a bit confused about whether there is a opportunity cost moving from within the PPF to be closer to the PPF and use some of the unemployed resources.
I current thinking is that there is zero opportunity cost of using unemployed resources  to produce more of one good because the alternative is that these resources will not be used and hence no wants or needs will be satisfied. Does my reasoning work? Or is the opportunity cost the used resources? Of units of the second that can no longer be produced?


texts: How is it traditionally defined the minimum wage legislation in economics? And which countries does not have a minimum wage legislation as defined in these terms?


texts: Is production side (or so called "firms") considered in "social welfare"?

texts:
When micro-economists refer to "social welfare" as measure of an outcome of a competitive equilibrium economic model, or "welfare economics" in general, is this taken to include a measure of the supply side's "welfare" too? Every description of this term / concept that I've found leaves room for doubt.

I mean Production side is part of a society and part of the economic models of societies. They have an objective and a payoff for participating in the economy. So why shouldn't their welfare be included?


texts: Rising Marginal Costs: where is the empirical evidence?

texts:
I was trying to find some kind of survey of the empirical literature on the evidence of firms operating under rising marginal costs. Recently I was in contact with Alan Blinder's 1998 book Asking About Prices: A new Approach to Understand Price Stickeness and the book shows a research on firms mentioning that they operate mostly under falling or constant marginal costs (in USA, almost 90% of them).

While I can raise some issues regarding the research, such as being the product of answers from the firms or that marginal costs are often not observed and must be estimated, I could not find a survey of the literature confirming this assumption (the evidence for behavior under rising marginal costs). Would anyone know where to begin?


texts: Normalizing comparisons of corporations and countries

texts:
When publicly-traded corporations reach record valuations, articles in the media often compare such valuations to the GDPs of countries throughout the world, typically in the form "Company X's valuation of Y is now larger than the GDP of all but Z of the world's countries..."

For example, a Fortune article from Nov. 2014 states:

  At this point, Apple’s market cap is higher than the gross domestic
  product of all but 19 of the world’s countries, coming just behind
  Saudi Arabia (GDP of \$745 billion) and ahead of Switzerland (\$650
  billion), according to data compiled by the World Bank.

This doesn't seem like a meaningful comparison to make, given that GDP and market cap are very different metrics.

Similarly, a Business Insider article compares corporate revenue to countries' GDPs. This is intuitively a better comparison than market cap to GDP, but wouldn't comparing profits to GDP be a more accurate measure?

In summary, what are the best metrics for comparing the performance of companies to the performance of national economies?


texts: Question on the Definition of A Numeraire

texts: I'm familiar with the idea of a numeraire when prices come in the form $\frac{p_x}{p_y}$, but I'm still trying to figure out what the more general notion of a numeraire is. For instance, if all that I'm given is $p_x,p_y,$ and $m$: what is supposed to be the numeraire there? Is it just 1 unit of currency?


texts:
If I'm not mistaken, gold was used in early days of USA.

Why did we switch to fiat, i.e dollar bills. Originally they were backed by gold, so why not keep gold?

I'm just trying to understand basics of why USA switched to dollars (even if they were gold backed).

Thank you


texts: Proving consistency of quantile regression estimators

texts:
I have asked the question on the statistic section on stack exchange, but no one was able to give me an answer. I think this is actually is a question that touches econometrics so I am going to ask it here (I would like to use the answer to this in an econometric context):

I am a bit confused. The assumptions that have to be fulfilled so that OLS estimators are consistent (and efficient) are fairly straightforward.

I am currently trying to prove consistency of quantile regression (QR) estimators.

I have found the following lecture notes: https://eml.berkeley.edu/~powell/e241a_sp10/qrnotes.pdf

There are 4 assumptions listed (page 3) for the proof of consistency of the QR estimators. The first one being that the data $x_{t},y_{t}$ given $t=1,2,..,n$ has to be i.i.d. (independent and indentically distributed).

In the case of OLS the data only has to be covariance-stationary. To my understanding the above mentioned assumption of i.i.d. data rules out the possibility of for example autoregressive processes, since in that case the data points are not independent from one another. This in turn puts quite restrictive boundaries on the possible applications of QR.

Am I missing something here? Could someone clarify the assumptions for consistency of the QR estimators for me?

Thank you!


texts: Calculating Weighted Average Cost of Capital (WACC) in this example

texts:
I am stuck with an exercise where I have to calculate the Weighted Average Cost of Capital (WACC) of the company X.
The data is as follows:

We have two periods (t = 0 and t = 1). Company can be found in t = 1 in two states. Each state has a probability of 0.5. In t=1 the value of the company in State 1 is 200.000 USD and the value of the company in State 2 is 70.000 USD.
The corporate tax rate is 40 %. The incurred costs if the firms becomes insolvent would be 20.000 USD in t = 1, which is subtracted from the firm's value. Contingent unit claims are both in State 1 and State 2 equal to 0.45 USD.

Since I am not the economist, I would have the following questions. In order to calculate WACC we need to calculate cost of equity (Re) and cost of debt (Rd). I found in the literature that the cost of equity (Re) is obtained by CAPM (capital asset pricing model), where Cost of equity (Re)  = risk free rate - beta * (market risk rate - risk free rate)
Now let us suppose that the firm's capital is 100% equity financed. I have no idea of how to calculate the cost of equity using CAPM model. Using the data that I have at disposal I guess that I can calculate risk free rate by inversing the sum of contingent claims in State 1 and State 2 which is equal to $\frac{1}{0.90}$
The problem remains how to calculate $beta$ and market risk rate having at disposal only data that I presented above.


texts:
I am currently trying to gain some basic understanding of the mean-variance tradeoff. However, since I do not have an economic education background, I am struggling with some issues. Currently I am wondering which of the two is the key driver for decision-making. Let's say I have option A with a low variance and a low expected value, and option B with a moderate variance and a moderate expected value - which of the two would people choose? Are we more attracted by increasing profit or by relatively lower risks? Or is there no general principle and it depends on individual preferences?

I appreciate any input on that! Thank you in advance.


texts: How can governments seemingly run permanent budget deficits?

texts: How can countries afford to run budget deficits for decades on end and not become overburdened by interest payments on those debts?


texts: Adjusting GDP for Environmental and Resource Impacts

texts:
It is widely recognised that GDP as conventionally measured does not reflect an economy’s impact on the environment and its consumption of natural resources.  There have been various attempts to develop broader measures of economic performance via adjustments to conventional GDP (some of which also address non-environmental limitations of conventional GDP), for example:

Measure of Economic Welfare (Nordhaus & Tobin 1972)
“True NNP inclusive of natural resource stock diminution” (Hartwick 1990)
Gross Sustainable Development Product (GSDP) (Global Community Assessment Centre)
Genuine Progress Indicator (GPI) (eg Anielski 2001)
Green GDP (a term whose precise content appears to be disputed (see eg Boyd 2006))

Is this just a proliferation of alternative measures, or is it possible to discern progress or convergence towards a best or most useful measure that adjusts GDP for environmental and resource impacts, or perhaps different best measures for different purposes?


texts: Question regarding to Government Debt in Williamson Textbook

texts:
I am using the Williamson Macroeconomics textbook to look over a chapter on Monetary Policy and Banking (Chapter 12, 5th Edition).

For a bit of context, the author specifices the government budget constraint as:

$$PG+\left(1+R^{-}\right)B^{-}=PT+B+M-M^{-}$$

wherein it can be understood as a flow budget constraint. The term $PG$  is the amount in dollars of government purchases, and the term $(1+R^{-})B^{-}$  is the payment due on outstanding government debt. The LHS therefore corresponds to government outlays. The RHS consists in nominal terms, government recepits. The first term $PT$ measures nominal taxes, $B$ denotes government bonds, and the final term $M-M^{-}$ deenotes change in nominal money supply.

The question relates to what would happen the nominal money supply increased (the last term $M-M^{-}$ increased).

The explanation on page 455 is as follows: because both sides have to be equal, and one part of the RHS has increased, something has to give way. That means either $PT$ has decreased or $B$ has decreased or both to preserve equality. In the case that $PT$ does not change, the author explains that the government could reduce the quantity of bonds $B$ that it issues during the current period. This is an open market operation wherein the fiscal authority issues debt, and the monetary authority purchases some of this debt by issuing new money. In essence, the author argues that $M-M^{-}$ increases as $B$ decreases. This does not make sense to me, however. If the fiscal authority were to issue more debt, would $B$ not increase? That is, the quantity of bonds in the market would go up in this open market purchase. Am I missing something obvious?

Many thanks!


texts: Mankiw's version of the Cagan model - need help interpreting it

texts:
To keep the math as simple as possible, we posit a money demand function that is linear in the natural logarithms of all the variables. The money demand function is
$$m_t - p_t = -\gamma(p_{t+1}-p_{t})$$
where mt is the log of the quantity of money at time t, pt is the log of the price level at time t, and γ is a parameter that governs the sensitivity of money demand to the rate of inflation. By the property of logarithms, mt−pt is the log of real money balances, and pt+1−pt is the inflation rate between period t and period t+1. This equation states that if inflation goes up by 1 percentage point, real money balances fall by γ percent.

From Mankiw's Macroeconomics Textbook (Appendix, chapter 4).

I'm struggling to understand how this expression leads to the interpretation in bold. Applying some of the results from this answer to the same question (Need a math help for the Cagan's model in macroeconomics):
$$\ln\left(\frac{m_t}{p_t}\right)=-\gamma \ln\left(\frac{p_{t+1}}{p_t}\right)$$ (re-writing the expression to include logs)
$$RHS = -\gamma \ln\left(1+\frac{\Delta p_{t+1}}{p_t}\right) \approx -\gamma \frac{p_{t+1}-p_t}{p_t} $$
$$\text{(using } \ln(1+x) \approx x)$$
Now sub this back to the first expression:
$$\ln\left(\frac{m_t}{p_t}\right) \approx \gamma \frac{p_{t+1}-p_t}{p_t}  \approx \ln\left(1-\gamma \frac{p_{t+1}-p_t}{p_t}\right) $$
$$ \text{using } \gamma x \approx \ln(1+ \gamma x) $$
$$\frac{m_t}{p_t} \approx 1 - \gamma \frac{p_{t+1}-p_t}{p_t}$$
Am I correct and/or on the right lines? Not sure how to go about it from here.


texts:
I have some trouble with Nash Equilibrium. The specific question as follows.

Suppose that there are $2N$ people in the village, of which $N$ residents live in the first district, and each person chooses to raise $q_1$ sheep, and the cost of each sheep is $c_1$. In addition, n people live in the second district, and each person chooses to raise $q_2$ sheep. The cost of a sheep is $c_2$. The income brought by each sheep is $200-q$, where $q$ is the total number of sheep in the village.

Q: Find the number of sheep raised by each resident in the two regions under the Nash equilibrium of this game.

Here is my thought. For simplicity, let $I$ denotes the index set of individuals in the first district, similarly, $II$ for the second district.
For $\forall i\in I$, the profit maximization problem is
\begin{equation}
\max_{q_i} \pi_i=(200-q_i-\sum_{k\neq i,\\i\in I}q_k-\sum_{l\in II}q_l)q_i-c_1q_i\\
F.O.C\qquad \frac{\partial \pi_i}{\partial q_i}=200-2q_i-\sum_{k\neq i\\k\in I}q_k-\sum_{l\in II}q_l-c_1=0\\
BR_{q_i}(q_{-i})=q_i=100-\frac{1}{2}\sum_{k\neq i\\k\in I}q_k-\frac{1}{2}\sum_{l\in II}q_l-\frac{1}{2}c_1
\end{equation}
Similarly, for $\forall j\in II$, we have best reaction function
\begin{equation}
BR_{q_j}(q_{-j})=q_j=100-\frac{1}{2}\sum_{k\in I}q_k-\frac{1}{2}\sum_{l\neq j\\l\in II}q_l-\frac{1}{2}c_2
\end{equation}
Since every individual belonging to the same area is in the same situation, we can assume that
\begin{align}
\begin{cases}
q_i^*=a, &\forall i\in I\\
q_j^*=b, &\forall j\in II
\end{cases}
\end{align}
and then substitute it into the best reaction function, we have
\begin{align}
\begin{cases}
(N+1)a+Nb=200-c_1\\
Na+(N+1)b=200-c_2
\end{cases}
\end{align}
\begin{align}
\begin{cases}
a=\frac{
\begin{vmatrix}
200-c_1 & N\\
200-c_2 & N+1
\end{vmatrix}}{\begin{vmatrix}
N+1 & N\\
N & N+1
\end{vmatrix}}\\
b=\frac{
\begin{vmatrix}
N+1 & 200-c_1\\
N & 200-c_2
\end{vmatrix}}{\begin{vmatrix}
N+1 & N\\
N & N+1
\end{vmatrix}}
\end{cases}
\end{align}
I don’t know if I’m doing it right, and I’m going to solve it under the assumption that there is an interior point solution. I think if it is strictly proved, the cost $c_1,c_2$ may be considered.


texts: Must US Treasury backstop US Federal Reserve?

texts:
The Constitutional Case for the Fed's Treasury Backstops | Cato @ Liberty writes no, I think? But I don't quite understand the financial terms iike "lever-up", backstop", "helicopter money". I looked up backstop that just states "Support or reinforce".

  In short, and speaking generally, the Fed can "lever-up" all it likes without a Treasury backstop. The sole caveat is that, if its losses are so great that the present discounted value of its future net earnings is itself negative, it can lose control of inflation. That could happen were the Fed to disburse "helicopter money" on a grand enough scale, or were it forced by the U.S. Treasury to accept a deposit of several trillion-dollar  platinum coins. But it's unlikely to happen otherwise.

But Marketwatch on 27 March 2020 wrote YES.

  The Fed is only limited by how much backstop it gets from the Treasury Department.


texts: Are Cobb-Douglas preferences homothetic?

texts:
Our lecture defined a preference to be homothetic, if the following is true:

$$(x_1, x_2)  \thicksim (y_1, y_2) \Leftrightarrow (kx_1, kx_2) \thicksim (ky_1, ky_2)$$

Cobb-Douglas preferences can be displayed as some utility function of the following form:

$$u(x_1, x_2) = x_1^a \cdot x_2^b$$
Therefore:
$$(x_1, x_2)  \thicksim (y_1, y_2) \\
\Leftrightarrow x_1^a \cdot x_2^b = y_1^a \cdot y_2^b \\
\Leftrightarrow k^ax_1^a \cdot k^bx_2^b = k^ay_1^a \cdot k^by_2^b \\
 \Leftrightarrow (kx_1, kx_2)  \thicksim (ky_1, ky_2)$$

With this argumentation the Cobb-Douglas preferences should be homothetic.

The wikipedia article about Homothetic preferences however defined a preference to be homothetic, if they can be represented by a utility function  and the following is true:

$$ u(kx_1, kx_2) = k \cdot u(x_1, x_2)$$
And I am pretty sure, that this is not true for Cobb Douglas preferences:

$$ u(kx_1, kx_2) = (kx_1)^a (kx_2)^b = k^{a+b} x_1^a x_2^b \neq k \cdot u(x_1, x_2)$$

So what am I missing here? Are the definitions not equivalent? Did I calculate something wrong?


texts: Eating a Cake with Uncertain Preferences

texts:
I've been playing around with a lot of cake eating problems and have been messing with how uncertainty could enter the model. One thing that I'm thinking about is whether we can solve a cake eating problem with uncertain time preferences. In this case we have uncertainty about how our individual values the future each period.

The advantage of this framework is that it allows for considerations for behavioral interpretation.

Lets define a cake eating problem sequentially as:

$$\max_{c_t} \  U(c_t)=\mathbb{E}_0 \left[\sum_{t=0}^\infty\theta^t_t\ln(c_t)\right] $$

Subject to:

1.$ \ \  f(k_t)=c_t+x_t$ (resource constraint $c_t$ is consumption, $x_t$ is investment).

2.$ \ \  f(k_t)=k_t$ (Goods defined as dependent on cake size/capital at time $t$ as denoted by $k_t$).

3.$x_t=k_{t+1}$ (law of motion).

4.$k_0>0$ (Initial capital stock).

5.$\theta_t\in(0,1)$ and is a Random variable realized in period $t$ which doesn't follow an iid process.

Im guessing that the bellman that follows from this sequential definition is:

$$v(k_t,\theta_t)=\max_{k_{t+1}} \left\{\ln(k_t-k_{t+1})+\mathbb{E}[\theta]\mathbb{E}[ v(k_{t+1},\theta_{t+1}] \right\}$$

I know that this is definitely a contraction mapping based on the bounds placed on $\theta$.

However in terms of setting up this problem I'm not sure.

Any tips?


texts: Career change to economics from software engineering

texts:
I have a bachelor's degree in Computer Engineering with math courses such as Linear Algebra, Statistics, and Numerical methods.

I have about 2 years of experience as an Engineer. Although I'm fond of programming, I find my current work pointless and mechanical.

I'm wondering if it would be possible for me to switch to a career in economics, preferably doing something that has a direct impact on making people's lives better.

More importantly, would my current skills as an engineer help in such a career switch? I'm passionate about doing work that could one day have considerable impact.

I have found that a lot of universities do accept people from other backgrounds but require them to satisfy econ prerequisites before they can enter. Are these courses offered at community colleges in North America? Or can I take these at a university as a student who is not aiming for a degree?

Lastly, do economics ever serve in the private sector. I'm asking this because it seems that a lot of econ jobs would be as advisory roles in government institutions.

Apologies for not having the right tags. I couldn't find one for career.


texts: Use Brouwer's Fixed Point Theorem to Prove existence of equilibrium(a) with completely mixed strategies

texts:
How can one use Brouwer's Fixed Point Theorem to prove that the following game F has a solution:

F is defined as N={L,R} Ai=(g,1-g) where g must be positive and smaller than 1, that is, each player plays a completely mixed strategy and has the following payoff matrix:

\begin{array}{|c|c|c|}
\hline
&LU&LD\\\hline
RU&0,0&6,3\\\hline
RD&3,6&0,0\\\hline
\end{array}

I reached the conclusion that one cannot use such theorem to prove there exists a solution to the game since the plays do not belong to a compact set. Can anyone use it?


texts: Will the goods market be in equilbrium along the AD curve?

texts:
This is a question which was asked in the entrance to Jawaharlal Nehru University's (New Delhi) entrance for their post-grad program specializing in International Economics in 2014.

Which of the following is true regarding the relation between IS and AD curves?

a) The commodity market must be in equilibrium along the IS curve but it may not be in equilibrium along the AD curve.

b) An increase in government spending will shift the IS curve but not the AD curve.

c) The steeper the IS curve, the steeper the AD curve.

d) A horizontal shift of the AD curve is typically greater than a horizontal shift in the IS curve due to crowding out.

I'm pretty sure the answer is A but I cannot find enough matter to convince my friends who are convinced it's D. Please help!


texts: Exponential cost function (of effort) and something else

texts:
Consider a two-player model with P and A. A can engage in criminal activities and P can catch that by putting effort into it. The more effort P puts into it, the more likely he's going to catch the criminal, so the chance of catching the criminal is a function of P's effort.

I model the probability of catching the criminal as follows:

$$p(x) = \dfrac{e^x-1}{e^x}, x \in [0, \infty),$$
where $x$ is the principal's effort choice. In this way, we have $p(0) = 0$, and $\lim_{x\to\infty} p(x) = 1$.

Then I need to model the cost function of effort. In order to have an analytical solution, I need an exponential cost function as follows: $c(x) = e^x - 1$.

I have two questions:

How legitimate to have an exponential cost function of efforts like this?
Are there any better alternatives for these two specifications? For example, are there other choices to model the catching chance function $p(x)$ such that $p(0) = 0$, and $\lim_{x\to\infty} p(x) = 1$?

Thanks a lot for any comments in advance.


texts: Which type of work is actually Software Development?

texts:
Inspired by this question on DevOps Stack Exchange,
here is a question to economists:

For long time being, software engineering and IT operations have been - and I guess they still are - considered to be "services". I.e. the product is after all the time that I can trade and bill.
But, now we have many standard software components, and successful works like Kim Gene's "The Phoenix Project" align to industrial methodologies we know from manufacturing, and it seems like "manufacturing-like" teams become significantly competitive.
But then, billing hours is not really profitable if I am good, and not competitive if I am not so good.

Now, which type of work is done by computer specialists in software delivery and operations from economical point of view (manufacturing, service or something else)?


texts:
I am reading Melitz and Ottaviano (2008), but I find it hard to understand some math in the model.

The preference is given by :

, which implies a demand function:

Then the paper says the "inverse demand function can then be inverted to yield the linear market demand system for these varieties":

But what operations do they take in getting the function $q_i$?

I am very confused on dealing with the $Q_c$ variable, which is defined to be :

Thanks.


texts:
I am trying to learn the meaning of Terms of Trade, but I'm confused.
From the wikipedia article, it says that TOT is the ratio of the value of exports over imports,
and since for the other country these are reversed the TOT of the other country is the inverse,
but I don't understand how that works.

Suppose country X with currency symbol \$ trades with country Y with currency symbol ¥.
(I am using an exchange rate of \$1 = ¥5, but it is not relevant.)

We consider two commodities, A and B.  Companies buy inputs and sell output either buying wholesale and selling retail,
or buying inputs to industry and selling the product of that industry.

Input A can be bought in Y at ¥10.  Since in X it costs \$2.20 to buy it, company XA buys 3 million units from the market in Y.
Conversely B can be bought in X at $2, but it costs ¥12 in Y, so company YB buys 3 million units from the market in X.

Since country X exports 3M units of A, which in X are valued at \$2.20, the value of its exports is \$6.6M.
Since it imports 3M units of B valued at \$2, the value of its imports is $6M and 1.1 is its TOT.

Country Y exports 3M units of B valued at ¥12, imports 3M units of A valued at ¥10 for 1.2 as its TOT.

I don't understand why TOT should be reciprocal when they are 1.1 and 1.2.

EDIT: Maybe I am doing it wrong.  What is the meaning of "value" as in the value of exports and value of imports.  I assumed it is the cost if someone bought it locally.


texts: Effect on GINI of eliminating poverty in China

texts:
China eliminated extreme urban poverty this year and is on schedule to eliminate it in the rest of the country by the end of 2020.

How do I calculate the approximate impact of this change for China's 2021 GINI?


texts: What determines the rate of interest on national debt for a country?

texts:
From what I understand of Canada's rate of interest on the debt, after Pierre Trudeau, it was around 17.4%, after Mulroney, it was around 7%, and after Harper it was around 5.2%.

Finding these figures are somewhat difficult, but to the point; what is setting these rates? Does any of it have to do with a country's credit rating?


texts:
Are there any big, overarching research goals in economics?
Examples from other fields that come to my mind:

Mathematics: Millenium problems, Hilbert's problems, Collatz conjecture, ...
Computer science: Proof of P =?= NP, quest for an exascale system
Biology / Medicine: Cure disease, cancer, stop ageing

Probably, economics as a (social) science is inherently not the right field for such grandiose goals, but is there anything comparable?


texts: Name for a tax that captures all goods and services produced?

texts: Is there a name for a consumption tax that basically captures the GDP (all goods and services produced in the nation)?


texts: From mathematics to economical interpretation

texts:
I'm having trouble getting some intuition beneath the sheer maths of the following toy model:
\begin{align*}
(IS) : y_t &= -\eta r_t^e\\
(B) : r_t^e &= -\delta y_t + r_t
\end{align*}

Where $r_t$ is the real interest that applies for household, and $r_t^e$ is the real interest that applies for firms only. Given our IS curve, we assume that household do not care about $r_t$, so that aggregate demand $y_t$ is only a function of $r_t^e$ (i.e. firms do care about interest rate). Our $(B)$ equation states that bank lend money to firms based on the general level of GDP : the higher $y_t$, the lower $r_t^e$.

Now the following bugs me : you would believe that higher $r_t$ will deter $y_t$ (as it usually does). But in fact, if $\eta $ is high enough, one has :
\begin{align*}
y_t = \frac{\eta}{\eta \delta - 1}r_t
\end{align*}
Therefore, if $\eta \delta > 1$, we might end up with a positive relation between $r_t$ and $y_t$. Now what I don't know, is how to explain this appart from just stating "math" fact, i.e. I'm looking for an "economical explanation". What I know so far is :
\begin{align*}
y_t = \delta \eta y_t + r_t
\end{align*}
Therefore if $\delta \eta $ is high, we have more that a one-to-one multiplicative effect. But that doesn't explain to me why, given some possible value of $\eta$ and $\delta$, one might end up with a situation where a rise in $r_t$ will cause a fall in $r_t^e$, appart from stating the obvious maths behind it.


texts:
I obtained the historical CPI data available in monthly and quarterly format from a data repository. It seems that the Q1, Q2, etc. data are the average of the monthly data.

I thought that if I were to get quarterly data from monthly data, I can just take the March, June, Sept, and December closing figures. If I were to get the quarterly data for stock price or stock index, should I can just take the 4 month closing price or would I have to take the average of 3 months in each quarter?


texts: Can A Utility Function Take On Negative Values?

texts: Can someone provide a rigorous definition of a utility function? I had thought that a utility function only needs to the preserve the order of preferences. Thus a utility function can take on negative values as long as it preserves the order of preferences. Others have told me that a utility function cannot take on negative values. Is this a condition of a rigorous definition of a utility function?


texts:
I have a super basic question on international macro.
I read that an increase in the capital inflows (say because of favorable macro enviroment) can increase the domestic money supply. However, it is only the central bank that can engineer an increase in the money supply. How would this look like in practice?

Thanks!


texts: Where to find information to establish causation between economic policies and economic data?

texts:
I've merely taken a few economic courses in college -not an economics major-, so my knowledge regarding the field is limited. Lately I've been interested in learning about the economic impact of government policies, particularly in the USA and as easy as it is to find data on median household income, gdp per capita, poverty rates, dow jones index and so on, I'm unable to find much information on how the government policies have affected those metrics (beyond simple correlations).
I'm simply wondering how one could investigate causation regarding these metrics.


texts: How are productions called that solve the pooling problem

texts:
A well known mathematical optimization problem is called the pooling problem (see here pooling problem)

It has many application for example in oil production, food, chemical processes. Basically you are mixing stuff from nature, which comes in different qualities and require that the final product has a certain quality.
What is a common name for these type of productions?

It is different from something like automative production where you assemeble parts.
My first thought was something like "mixing/blending" production.
But is there a estabilshed name for this?


texts:
Maybe it's just my english...

In reading some notes on the estimations of parameters for stationary models like AR, MA, and ARMA, the author states that when we apply OLS to a simple AR(1) $\{Y_t\}$ with mean $\mu$, «we sometimes say, except for end effects, $\hat \mu = \bar Y$, where $\bar Y$ is the sample average.

What does the expression «end effects» mean?

Any help would be appreciated.


texts: Is there a standard density-dependent calculation method for demographic extrapolations?

texts:
In trying to come up with a method of evaluating the damage from pollution, I did not see a "demography" site or "population dynamics" site so I am not sure where else to ask this. What I would like to do is to extrapolate both human and economic factors to larger populations by also considering world-wide population density in different regions. In all my years within acedemia I have not encountered this method in any course nor any professor who specializes in such material enough to direct to these methods and information, so I have no idea what it might be called or where to look.
For instance, suppose a pollutant like mercury builds from factory runoff and mining activities and causes $x$ deaths per year in a specific community of a certain population density, a certain mercury density (PPB) and certain surface area. This will inevitably cause more deaths in more densely populated communities, and for the moment ignoring the additional environmental degradation, will potentially cause less deaths in less dense communities which experience the same or smaller PPB. Two approaches are to assume average uniform pollution density and uniform population density, or, to use two sets of densities, one for mercury concentration and one for population density.
It is feasible to obtain some information on the economic damage of mercury to specific communities of a certain density. In that case, I would like to extrapolate the results to create a theoretical estimate of the damage for other communities of varying densities over the world.
I anticipate in some way that I will need some double or triple integral method to integrate over the two densities, but I can't possibly be the first person to come up with such an concept, I am sure there must be some kind of convention or technique among demographers for doing density-dependent calculations.


texts: Decreasing performance pay in the risk-aversion of the principal

texts:
What is the intuition behind a decreasing performance pay ß if both principal and agent are risk averse compared to a principal being risk neutral and an agent being risk averse?
Actually, intuitively I think it would make more sense if the performance pay to the agent increases, such that the agent would bear more risk, so more risk is relocated from principal to agent if the principal is risk averse as well.


texts: Why do businesses care about rate(s) of change?

texts:
I'd like to introduce math-students to the concept of average and instantaneous rate of change, in order to get them interested in the topic.
I found the following example:

  Based on data from 1990 to 2000, the average price for a half gallon of prepackaged ice cream may be modeled by
  $$
C(t) = 0.0142*t^2 - 0.0272*t + 2.53
$$
  where t is the number of years since 1990. (Source: Modeled from Statistical Abstract of the United States, 2001, Table 706, p. 468.)
  To help project future revenue, a creamery wants to know what the average annual increase in the price of ice cream was from 1990 to 2000 and at what rate the price will be increasing at the end of 2000.

So, in other words, we are looking for the average and instantaneous rate of change.

My question is the following:
Why is the rate of change important for economics? I know this sounds silly, but if my goal was to project the price of ice cream for let's say 2015, all I had to do was insert the value 25 for t and I'd be done, right?
So why do we care about the rate of change in economics? What is to be gained by this information and what would be decided differently after finding out the rate of change?


texts:
(Note: the other posts do not cover this part of the derivation)

I have tried to compute the FOC of $k_{t+1}(s^t)$. I get that $0 = -\lambda_t(s^t)$; I can't see why the sigma remains for the FOC of $k_{t+1}(s^t)$ and not $c_t(s^t)$.
[SOLVED: had to use the fact that we can consider $s^{t+1}$ that realizes $s^t$]


texts:
I'm studying "ALGORITHMIC AND HIGH-FREQUENCY TRADING". Page 249 of it tries to find a formula for $h(t,q)$. First, it supposes $h(t,q) = \bar\kappa log  \space\omega(q,t)$ then let $\omega(t)=[\omega(t,\bar{q}),\omega(t,\bar{q}-1),...,\omega(t,q)]'$.

My question is: "What is the meaning of notation $'$, in $\omega(t)=[\omega(t,\bar{q}),\omega(t,\bar{q}-1),...,\omega(t,q)]'$?
Is it Lagrange's notation for differentiation?

Following, I added a photo of this page. I marked the notation which I mean.


texts: Calculate dividend yield using cumulative dividend and price

texts:
I just learned basic theory of option pricing and I'm doing some exercise. There is a problem about dividend yield. Suppose we are given cross-sectional data like this:

where $S$ is the price of underlying asset (The SP500 index for this question), $cumdiv$ is the total dividend for the remaining maturity of the option, estimated from the dividend yield of the SP500 index, $Sx$ is the price excluding dividend.
My question is, it seems that one needs to calculate dividend yield ($q$) for option pricing. I think we can calculate $q$ by
$$
q=\frac{cumdiv}{Sx}\times\frac{365}{maturity},
$$
is this right?
Any hint is appreciated!


texts:
I have a market with 1000 suppliers.

The total demand can be described by

$$
Q=-300000 P + 6000000
$$

while the total supply can be described by

$$
Q=200000 \sum(MC^2)-200000
$$

What is the price and quantity in equilibrium?

I have no idea what to do with $\sum(MC^2)$ in the supply.

I guess I should isolate $P$ in the first equation:
$$
P(Q) = 20-\frac{1}{300000} Q
$$
but I don't know what to do now.


texts: Does treasury pay interest+ face value to the fed?

texts:
heard all the profit that the fed makes goes into treasury.. does that mean the treasury department can make unlimited money buy selling bonds to the fed? like if they issue bond to people, and the fed purchases them through OMO, then all the treasury bonds and the interest to be paid on bond will be given to the treasury right?
When someone buys a Treasury bond, the government must pay them interest. This applies to the Fed as well, but then at year-end the Fed remits the interest back to the Treasury. The federal government paid out $223 billion in interest payments last year
This is the article I was reading about


texts: What do all the distributions that have the same Gini index have in common?

texts:
According to the Wikipedia article about Income inequality metrics, Gini index have the next disadvantage:

As a disadvantage, the Gini index only maps a number to the properties of a diagram, but the diagram itself is not based on any model of a distribution process. The "meaning" of the Gini index only can be understood empirically. Additionally the Gini does not capture where in the distribution the inequality occurs. As a result, two very different distributions of income can have the same Gini index.

So, I want to ask - what do all the distributions that have the same Gini index have in common? (Empirically, they produce the same area under the Lorentz curve, but what does that mean?)
Thanks!


texts:
How would you answer the following question?

You work for a CEO of a large firm. He says to you, "In my experience collusion is less likely to be sustained as the number of firms in the market increases. Demonstrate this using a model of Bertrand Competition."


texts: Does a fall in the wage rate always reduce hours worked?

texts:
In the Neoclassical Labor-Leisure model, does a fall in the wage rate always reduce hours worked?

Or does it depend on whether the substitution or income effect dominates?


texts: Book recommendations: Introduction to economics

texts:
I recently made my first trip to a foreign country. I'm quite amazed by how things work. Why are things priced differently at different places? Is the bed-sheet that I bought from that country worth the same in my country? I brought my bed-sheet there in \$40 while the same will cost less than \$10 in my country.

Also, I learnt about utility through this video. I'm just in an awe. These things are so beautiful yet not visibly understandable to me. I'm sad as well as happy I didn't learn about any of these in my school. Sad because I potentially wouldn't have ever studied it. Happy because I can learn this thing with interest, as the school and university I attended have usually taught me in a way that makes things dull.

My background is bachelors in Computer Science. I'm decent at maths. I would like to ask you for book recommendations that will help me get some idea of how things work from an economic standpoint. How banks work, how loan works, what is money etc.

I would like you to suggest me two kinds of books:

That are example based, easy, concise, less mathematical but more story based.
That are mathematical and cover these theory in details.

Thanks.


texts: Introductory book for asset pricing and financial economics

texts: I am going to complete a continuous time finance course in  the upcoming semester. Although all my higher education is in economics I have not encountered a financial economics setting of contingent markets,i.e, of the geometric representation of the state space of the aforementioned. I have a solid knowledge on investments, financial markets and financial products such as derivatives but I was looking for the mathematical finance formulation of contingent markets. What introductory book would be good for an introduction in the simpler settings before jumping to the Black-Scholes setting for example which is the end-goal of the class I am going to take. Cochrane's book "Asset Pricing" is similar to what I am looking for but I would like to know if there are any alternatives.


texts: I have been searching for papers that conduct lab experiments simulating a labour market, that means for a minimum there are both participants taking the role of firms, and participants taking the role of job searchers, and these two parties form work contracts. The focus should be on the contract formation, not the principal agent / effort provision part. The more macro the setup the better. The only references I found are Falk, Fehr, and Zehnder (2006), and (although less relevant than the first) also Brandts and Charness (2004). Both very interesting papers. If anybody knows further similar experimental setups (especially more recent ones), it would be really helpful.


texts: How does the bank of Canada define "output"

texts:
Im trying to replicate the forecasts of this VECM model presented by the bank of canada in The M1 Vector-Error-Correction Model:
Some Extensions and Applications

Context (from page 24 in the pdf).

  Details of the Adjusted-M1 VECM
  Step 1: Estimating long-run money demand and the money gap
  The Johansen-Juselius methodology is used to test for the existence of a
  unique long-run cointegrating relationship between money, inflation, output,
  and interest rates (non-seasonally adjusted data). The model is an errorcorrection
  model because deviations of money demanded from money
  supplied (the money gap) are assumed to be corrected in the long run. The
  model has the form
  $$\Delta X=\Gamma(L)\Delta X_t+DZ_t+\alpha \beta^{'}[X_{t-1},D80a_{t-1}]$$
  , (A1)
  where
  $X_t= [M1_t, CPI_t, Y_t , RONf_t]$

  $RONf_t$= level of “policy-free” overnight interest
  rate =$RONf_t- \epsilon_t$

  $\epsilon_t$ is the residual from the interest rate equation(A8)

  $M1_t$=log level of adjusted M1
  $Y_t$= log level of real output
  $CPI_t$= log level of the consumer price index
  $Zt$= [constant, 3 seasonal dummies, output gap$_{t–1}$, log(exchange
  rate) from $t$ to $t–3$, $USCP90_t$
   rate, $D80b^* \Delta NPNt$
  , $D80a_t$]

  $...$

Im just wondering, how does the bank of Canada define output $Y_t$? do they mean GDP?


texts: Should the government regulate the price of bananas?

texts:
Diclaimer: This is not a homework question. Every word of it was written originally by me.

Hypothetical Scenario

Alice is shopping for groceries and thinks the current price of bananas at $0.79/lb is a little too high for her budget. Alice calls Bob, her local legislator, and asks Bob to sponsor a bill that regulates the price of bananas to cost no more than $0.50/lb in the grocery store so Alice can afford to buy them.

Bob thinks this is a great idea because it will help more people (especially the poor and those on a fixed income) afford to buy more bananas — a very nutritious food.

Question

Is this bill to regulate the price of bananas really a good idea? What would be the impact of such a law if it were to pass?


texts: Productive and Non-productive investment

texts: What is the exact difference between Productive and non-productive investment? There is no hard and fast distinction that I could find. Additionally, Is it correct for me to label non-productive investment as speculative investment?


texts:
This question confuses me for some time. My first impression is that Pareto sub-optimality is due to feature that old generations will consume everything without any incentive to trade. But after taking a look at the first example in an modern introduction to economic growth, it's just a disguised version of Hilbert's paradox of grand hotel.

Screenshot in the book:

What is the true source of dynamic(Pareto) inefficiency in OLG models?


texts: Isn't the liquidity trap about real interest rates?

texts:
Here is a so-called thought experiment. Suppose the inflation rate is negative, the nominal interest rate slightly negative, and the real interest rate positive (call it $r$). I think people would rationally make the same savings decisions as if they were in an economy with a real interest rate of $r$, but positive inflation.

But, the liquidity trap is about the nominal interest rate. It says that the nominal interest rate can't drop below zero. I'm trying to understand why, and I think the question can be framed in terms of what banks will decide to do with bonds they own. When the real interest rate is positive, banks will continue to create money and buy bonds, no matter what the long run nominal interest rate is. If the real interest rate were negative, banks would not buy any more bonds, would get less money when selling their current bonds, and they would start to run out of liquidity (no matter what the nominal interest rate is).


texts:
I am wondering if there are literature which studies specific properties of the set of utilitarian weights?

To be more specific, when we have some axioms that characterize the preference of a social planner (and  gives a utility representation), we can usually say the set of utilitarian weights is convex and closed. But are there previous papers studying more properties about the set?

I am grateful if some one can point me out some related paper regarding properties of set of utilitarian weights.


texts: Best strategy to incentivise third party investment

texts: How can governments incentivise NGOs and economic consulting firms to invest in national reserve conservation? I guess this would be more political, but what are the more economic aspects of trying to get corporations involved?


texts: What Math is used in Development Economics?

texts:
I would like to ask what kind of math is used in Development Economics?

I have one more semester in my Master of Math programme before hopefully entering a PhD in Economics and am considering specializing in this; so I would like to know what I should take or review next semester.  Are the topics listed on the wiki-page for Mathematical Economics applicable?  Being differential equations, linear algebra, optimization, and analysis.  Or would statistics or data science be more applicable?

Thank you


texts: Building a (relatively simple) Model which indicates macroeconomic movements

texts:
Suppose you have a particular view on the state of an economy, let's say for sake of argument, that China is slowing down.

My question here is: Using aggregate levels of macroeconomic data (this could be any sort of data that is available on interest rates, PMI data, CPI, unemployment, everything), how would one go about working this into a model which would be simultaneously (running in the background) be giving an indicator of if an economy was slowing down or not.

What i'm really after is just your ideas, knowledge, and any references to this sort of problem in literature/practice. This isn't an exam type question, but more of a personal project type thing I was interested in looking at.

If there were ideas of how the model would look, what the model's indicators would suggest, all would be really helpful in me exploring this idea.


texts: What is the difference between a power law exponent and the Pareto exponent?

texts:
I use the poweRlaw package in R to fit a power law to my data. I am trying to figure out what is the value of the Pareto exponent.

Assume the probability mass function is defined by:

$$
p(x) = \frac{\alpha-1}{x_{min}} \left(\frac{x}{x_{min}} \right)^{-\alpha}
$$

and the complementary cumulative density function is defined by:

$$
P(x) = \int_x ^\infty p(x’) dx’ = \left(\frac{x}{x_{min}}\right)^{-\alpha + 1}
$$

Is the Pareto exponent $\alpha$ or $- \alpha + 1$ or  $\alpha - 1$?
In most literature, the CCDF is used to describe the income/wealth distribution, and $-(\alpha-1)$ is the slope of the CCDF on a log-log plot, so $\alpha-1$ seems the most intuitive. I'm pretty sure the R library poweRlaw returns $\alpha$ as defined above.
I am using Newman as a reference.


texts: Causal effect of population growth on GDP per capita increase

texts:
I'm wondering if there is a logic for the causal influence of population growth on the increase in GDP per capita.

I guess,

increase in population as a factor of production might move aggregate supply curve to the right, lowering the price.
increase in population as consumers might move the aggregate demand curve to the right, increasing the price.

In both cases, the total amount may increase. But I don't understand how these reasons combine to explain the causal effect (if any!). So, why they are so worried about low birth rate?


texts: What does price embody ? Do we constantly undervalue some type of products?

texts:
I'm not sure to fully get the meaning of prices. If I understand well, there
are two drivers of it :

The theory of demand and supply and thus prices are driven partly by the utility that agents get from it.

Production costs : On the long-run, prices look to converge towards something like the minimal cost of their production due to the fact that the supply side innovates enough to reach this (that's my interpretation). So on the long run prices of things tend to decrease.
But then, is there something such as the price reflecting the actual utility that consumers get from it ?
Indeed, some goods are really cheap because there is a strong competition on it but nevertheless, they
give their consumer a big utility (coffee for instance). Given the competition, even if the disposal to pay of consumers is more than 2€, they pay it 2€ (because no supplier could raise its price
withou losing all the market).
Therefore, we could have something like : all the goods that are produced at their marginal cost are underrated, have an underrated value and the true disposal to pay of people for it is higher. There's probably a flaw in my argumentation but I don't see it.
Does anyone have an idea ?


texts: Information Partition and Common Knowledge

texts:
Person $A$ has information partition $\{\{1,2\},\{3,4\},\{5,6\}\}$
Person $B$ has information partition $\{\{1\},\{2,3\},\{4,5\},\{6\}\}$
$w=3$ has been realized.
I'm confused about what $A$ knows that $B$ knows.
At first I thought of it as $K_aK_b(3)=K_a(\{2,3\})=\{1,2,3,4\}$, but the example I found online says $K_aK_b(3)=\{2,3,4,5\}$. why?


texts:
Consider a two period OLG model where each young agent recieves an endowment of $w$ units of the single commodity good in the 1st period of his/her life, and nothing in the second period.

Each period the government consumes the fraction $\bar{g}$ of the total endowment. $\bar{g}$ is i.i.d with mean $\bar{g}$. The government's expenditures are financed  by lump-sum taxes, money and one-period discount bonds. $M_{t}$ and $B_{t}$ are the supplies of money and nominal bonds at the end of period $t$. The government's budget constraint is then:

$\frac{B_{t-1}}{p_{t}} + \bar{g}w = \tau_{y}(t)+\tau_{o}(t) + \frac{M_{t}-M_{t-1}}{p_{t}} + \frac{B_{t}}{(1+i_{t})p_{t}}$

$\tau_{i}(t)$ is the lump-sum tax where $i$ is either the old or young generation.

My only problem with this budget constraint is the $\frac{B_{t-1}}{p_{t}}$ component. I understand that it is the current real obligation but I don't understand why there is no interest component. I am self-studying OLG models so my reasoning might be flawed but here is how I see this constraint:

The RHS is the government's revenue in period $t$, which consists of tax revenue from the young and the old, seigniorage and new bond issuance. The LHS is the expenditure of the government in period $t$. It can spend the income on consumption ($\bar{g}w$), to pay off the existing debt ( $\frac{B_{t-1}}{p_{t}}$) but what about the interest on the existing debt?

I am used to seeing government constraints in the form of:

$g_{t} + r_{t-1}b_{t-1} = t_{t}+(b_{t}-b_{t-1}) + h_{t} - \frac{h_{t-1}}{1 + \pi _{t}}$

This is almost identical to the author's budget constraint only that it includes an interest component. What am I missing here?

For reference, the budget constraint was obtained from Aiyagari and Gertler (1985)


texts: US Student debt volume and default rate data source

texts: I would like to see data for private and public student loans and their default rate over time


texts:
I have a problem where my answer does not seem to be right anywhere. For the following set up:
Budget constraint: $400=40x+20y$
Utility function: $u(x,y)=3x+y$
the problems asks to derive the demand function for $x$ (for the given $p_y$). And I get to:
$$x=f(p_x)= \begin{cases}
      \frac{400}{p_x}\quad\quad &if\quad p_x<60\\
      0\quad\quad &if\quad p_x>60\\
      \left(0,\frac{400}{p_x}\right)\quad\quad &if\quad p_x=60
   \end{cases}
$$
When I graph this, I get the following chart:

I was told that the step between 40 and 60 for $p_x$ should not be there, but I can not figure out why. Can someone please explain what am I missing?


texts: Has an increase in housing supply in popular cities including Amsterdam led to an increase in house prices?

texts:
Common economic thinking dictates that an increase in price should lead to an increase in supply, and that an increase in supply should then lead to a decrease in price.  According to Maarten van Poelgeest, former alderman of Amsterdam, the opposite is happening in Amsterdam and other popular cities.  He is quoted in an article in De Groene Amsterdammer as saying:

  ‘Hoe meer er gebouwd wordt, hoe aantrekkelijker de stad wordt. Er komen meer voorzieningen, er komt meer reuring. Nieuw aanbod maakt de vraag dus juist weer groter – en de huizenprijzen hoger.’

Which means:

  ’The more there is built, the more attractive the city becomes. There will be more facilities, there is more bustle. New supply therefore makes the demand even larger – and house prices higher.’

The reasoning by Maarten van Poelgeest appears plausible, but is there any evidence that this is actually happening?  Is there evidence that an increase in housing supply leads to an increase in house prices, due to housing in the area becoming more attractive?

I'm looking for an answer based on empirical evidence from trends in the past up to the present, in order to present the claim/hypothesis by Maarten van Poelgeest up to the best available measurements.

NB: I am emphatically not asking just for a correlation.  A correlation between increase in supply and increase in price can easily be explained by the reverse of the causation I'm asking for here.  I'm aware that causation is harder to provide evidence for but it should not be impossible.


texts:
Why is railway electrification in North America far less common than in Europe?  I suspect that the answer has something to do with the economics of electrification.  In Europe, railway electrification varies a lot between countries, ranging from 3% in Ireland to 95% in Luxembourg (not shown: 100% in Switzerland):

Source: European Commission: Mobility and Transport.
In the USA, less than 1000 km is electrified, or less than 0.5% of the network length.
One might expect the answer to be related to population density, but electrification rate is 76% in Sweden, 55% in Finland, and nearly 50% in Russia, three countries with lower or much lower population densities than the USA.  The US network is primarily freight whereas the European network is dual-use, but many freight-heavy railway lines in Europe (and Asian Russia) are electrified as well.  The Trans-Siberian railway electrification completed in the 21st century.  Why is it, then, that railway electrification is apparently economical in Europe, but not in the USA?


texts: How to find the points on a budget line?

texts:
Hulk goes to the gym 20 times a month. His income is 1,000 per
  month and his visits to the gym cost $4 per visit.

  Draw Hulk's budget line for visits to the gym and all other goods,
  show the consumption bundle that maximizes his satisfaction, and
  draw the indifference curve through that point.

How do I find the quantity and price for "all other goods"?


texts:
I know little about economics and am very confused on what this graph represents.
 I found it when I saw that the President had tweeted it and was wondering what it mean.  Specifics what "Jobs plentiful" and "jobs hard to get" are measured in.


texts: If banks started simply depositing money with each other, then what else?

texts:
[Source:] If banks started simply depositing money with each other, all else aside, then what would happen? Keep in mind that the interest rate is basically the price of money. Supply-and-demand would dictate that ... ♦ a huge inflow of capital => you can lower the interest rate paid on that capital ♦. Banks don't pay high interest (and certainly wouldn't do so to each other) because of their intristic good will; they pay high interest because they cannot secure capital funding at lower rates. This is a large reason why the large banks will generally pay much lower interest rates than smaller niche banks; the larger banks are seen as more reliable in the bond market, so are able to get funding more cheaply by issuing bonds.

I understand (and so ask NOT about:) that interest rate = the price of money = opportunity cost of money, and also the implication that I surrounded with ♦ (a lozenge). What else would result? Please differentiate and segregate the positive and negative effects.


texts: Price ratio determined by endowments only?

texts:
Am I right to say in an Exchange Economy with two consumers with identical preferences, the equilibrium price (WEA) of the two goods would be determined by availability of two goods, i.e, total endowment?
Whereas if their preferences are not identical, this is not true, the equilibrium(WEA) would be determined by utility functions and endowments together?


texts: I have a panel dataset and I would like to estimate a linear equation in a fixed effects framework. My question is: how should I implement a two-way clustering? Stata syntax and/or .ado file necessary would be greatly appreciated.


texts: It would seem to me that the two keys to success for an NFL franchise are player acquisition and player development. That is, you have to draft well and then you have to successfully develop the players that you draft. You often hear commentators and analysts talking about franchises being good or bad at either or both of those. Of course, it's hard to separate the two. Were good NFL players destined to be good on any team, or is their development within the teams that determines their ultimate success? Obviously the answer is both, to some extent, but have their been studies that have tried to disentangle the two and compare their relative importances? Has it been done for other sports? Obviously it could be challenging to get the econometrics right, but it seems possible.


texts: Are CPI stats weighed based on population size

texts: Generally inflation and CPI are reported on a national level. If a country for example has 10 cities, after surveying prices in each individual city, how is the total CPI number determined for the national level? The cities may have very different living costs and population sizes, how is this taken into account when aggregating to a single CPI value?


texts: What does it mean, 'Higher interest rates attract FIIs and FPIs'?

texts: What would interest rates have anything to do with shares? When we say a higher interest rate attracts FII/FPI, does it not mean it is investing in shares of a company? For example, how does it help a foreign company, if it is investing in the shares of an Indian company because rates are high in India? It isn't some 'Fixed Deposit' or Mutual Fund, returns out of investment in stocks would be purely based on fluctuations of share price, nothing to do with interest rates; so how would a high interest rate deter the returns out of investment in shares?


texts: why subsidy is given why not govt direct discount the prices?

texts: I have a great confusion about the fundamental of subsidy . Why government give subsidy when it can also discount the price but it doesn't do so ?


texts: Books to self-study applied econometrics

texts:
I'm a student and I'm interested in focusing on the application of econometric theory to "practical" situations. It would be great if you can suggest freely available books along with those that are not. The best thing would be books with explained examples of applications to real data. Also, a good and solid theoric book would be appreciated (maybe with a practical approach to the theory). All the above, whether it would be possible, may consider econometrics in general and macroeconometrics (in this area, along with the general topics, also some specific suggestion on forecasting would be great).
Summing up, the books I would like you to suggest me has to refer to these arguments:
- econometric theory
- applied econometrics
- macroeconometric theory
- applied macroeconometrics
- forecasting
- applied forecasting
I know that's a huge question and every suggestion would be strongly appreciated.

As properly suggested I add that for the applications any of Stata, Eviews and R is ok. About my background I think I can say to have a good graduate preparation, but it is fair for you to suggest books that starts from the basics concepts.


texts: Marx: Relative and equivalent-form. Difference?

texts:
I don't understand the difference between the two. For example:

2 Shoes = 3 wood

Now Marx says that the first is the relative-form and the second is the equivalent-form. So the use-value expressed in the equivalent-form is represendet in the value of the relative-form. Why does the equivalent-form represent the use-value of the wood? Isn't it just a commodity with use-value and exchange-value? So why is the equivalent-form only the use-value of that thing?

Marx says in the simple-value form there is a contradiction because one is equating use-value and it's opposite, value.
But aren't they both commodities with use- and exchange-value? Because they already exist as commodities in the system.
Is it because the commodity is "new" in the market and exists only as use-value until I put it into the relationship with commodities in the market and therefore obtains value??


texts: Why has QE produced hyper-inflation in other countries, but not US and China?

texts:
QE and similar methods ("printing money", increasing M2 money supply) have caused currencies in countries such as Zimbabwe and Venezuela to collapse.

Why hasn't it caused similar issues in countries such as the US and China which have also increased their M2 by large amounts over the past decade?


texts:
I would like to know why we always focus on 10 years sovereign rates when we talk about interest rates ?
Let me clarify. I'm reading a paper from the Bank of England that emphasizes the fact that since the 80's the natural interest rate is falling. And to illustrate it they show us that 10 years sovereign rates are falling in USA and Europe. But why did they choose these sovereign bond as a proxy for the natural rate ? I mean, the natural rate is influenced by structural forces (demographic, productivity and so on..) while sovereign rate depends on other things (central bank policies, risk etc..).


texts: Utility function of habit formation model

texts:
In the habit formation RBC model, the utility can be given as follows:

$U(c_{t},n_{t}) = \ln(c_{t}) - \frac{\theta}{1+\upsilon} \bigg(\frac{n_{t}}{n_{t-1}^{\phi}}\bigg)^{1+\upsilon}$

When I do FOC wrt $n_t$, I'm confused about how to treat the variable $n_{t-1}$. Is it exogenous or should I try to find $\frac{\partial n_{t-1}}{\partial n_t}$?

Many thanks.


texts: Does only "supply/demand" rule justify different prices for a digital good?

texts:
Provided the network infrastructure costs the same for the seller (if things going on with net neutrality weren't to effect that), certainly considering the fact that an average citizen of a given "low average $ income" country would have less money available for digital products than say someone from Germany or U.S.A.

What are the mechanisms that justify large price differences between different countries (3x ratios or more) ?

Edit: Thanks for your answers.
As real life examples, what struck me is any app here https://steamdb.info/apps/ but as you suggested it applies for various digital goods on amazon and other sellers.


texts:
how can devaluation of a nation's currency  lead to increase in government expenditure, hence facilitating economic growth.

I was reading through a textbook and saw that the devaluation of a nation's currency  can lead to increase in government expenditure, hence facilitating economic growth.... But it wasn't really explained. How is this possible please? I need an economist perspective. I'm an accountant.


texts: Why are interest rates so high in Russia?

texts: In Russia we currently have 11% of Central Bank's interest rate and you can get credit in commercial bank for about 25% in year. Why are interest rates so high?


texts: Effect of Promotional Sales on a Demand Curve

texts:
If there is news that shops are having a sale on dress shoes (beginning right now), will it shift the demand curve for this good?

I initially said yes, as a sale should increase the quantity demanded of dress shoes (resulting in a shift in the demand curve).

However, the answer in my textbook says no. I do not understand.


texts: How would one go about modelling "supply induced demand" (SID) using the regular supply and demand model and how is SID different from price discrimination?


texts: Does this sort of attemted bridging of disciplines equal more than adding parts or is it trivial to a person understanding each discipline?

texts:
Scribbled notes

cosinus distributed over tangent tangens plane
from math import pi, tan, cos
from matplotlib import pyplot

x_tan = []
y_0 = []
y_cos = []

bound = pi/2
sieve = 1000
for column in range(sieve):
    x_tan.append(tan(bound*column/sieve))
    y_cos.append(cos(bound*column/sieve))
    y_0.append(0)

pyplot.plot(x_tan, y_0)#Graph
pyplot.plot(x_tan, y_cos)#Graph
pyplot.show()#Graph


texts: The relationship between the expenditure function and many others!

texts:
I dont understand the relationships between Hicksian demand, walrasian demand (marshallian), the expenditure function and the indirect utility function (including the value function V(b)).  I have found this subject very difficult and cannot comprehend how they relate to each other due to the formality that is used in the books I have available!

I understand how to derive the indirect utility, however, I need to be comfortable to show how I can use it to derive the expenditure function and the rest and how they differ in dualities!


texts: Under what conditions are tariffs or export subsidies expansionary?

texts:
Charles Kindleberger writes in the introduction to /The World in Depression/:

  The imposition of tariffs should be expansionary for the importing country, if contractive for the countries losing export markets.

I am not sure if this is right. In the long run, shouldn't the effect of an import tariff lead to an appreciation of the real exchange rate as relative demand for domestic output increases? This appreciation would raise export prices and reduce import prices, undermining the effect of the tariff. However, isn't there also the effect of a tariff (in a large country) on the terms of trade, in which case a tariff allows a country to buy imports more cheaply, which could be expansionary?

Export subsidies should also lead to real appreciation in the long-run, raising export prices and undermining the effect of the subsidy. But here the terms of trade worsens by making exports relatively cheaper. So aren't export subsidies contractionary?


texts: Why, theoretically, is economic growth exponential?

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Despite the experimentally well-observed exponential nature of GDP growth, I've never actually seen a theoretical reason or "prediction" why it should be so.
(Even if the answer is "actually, it isn't exponential, growth rates increase/decrease ever so slightly", the question "why is it almost exponential?" still remains.)
Similarly, what is the standard economic explanations for the big "breaks" in economic growth rates ~10,000 BC and ~1700 AD? Historians explain it to be the result of specific technologies, but this seems to be a post-hoc explanation to me (i.e. you couldn't actually predict the effect on GDP growth from just information about technological changes -- is there any theoretical reason why "agriculture" and "the steam engine" would create a break in economic growth rates but "the assembly line", "3D printing", "computers" or "women entering the workplace" wouldn't?). What is the economists' explanation? Changes in political/economic systems?


texts: Intuition Behind the Definition of Prudence?

texts: I'm having trouble seeing why an agent is said to exhibit "prudence" when u'''($\cdot$) > 0. How does having a utility function with a strictly positive third derivative make an agent act "prudently"? Thanks in advance.


texts: Reference request: modeling firms that act to create demand for their products

texts:
(I don't have an economics background; apologies if my terminology is confusing.)

It seems like there is often a situation where a firm can take actions to create demand that did not already exist. For example, the classic door-to-door encyclopedia salesman. Before a visit from the salesman, you feel no desire to own an encyclopedia. But the salesman points out that encyclopedias are helpful for a child's development; you look at your child, whom you love, and now you feel a desire to buy an encyclopedia.

I'm interested in economic models of this dynamic, and would appreciate being referred to any.


texts: How do efficient credit markets allocate capital properly?

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I've learned that efficient credit markets should theoretically allocate capital efficiently, which means that all possible investments should have the same marginal product of capital (assuming some type of concave production function).

How exactly does that work? On the surface level, it makes sense that we should allocate more money to projects that have higher returns, but what would be the mechanism by which that happens? It seems like banks would have to charge a higher interest rate in Africa - and does that happen? I think I'm having a lot of trouble developing the correct intuition here.


texts: Marginal utility and convex utility function

texts: If we have a convex utility function, like the quadratic one, does the law of diminishing amrgnial utility still apply or do we have that the partial derivative of utility with respect to, say consumption, is increasing in that input?


texts: are binary vectors and modular arithmetic important in economics?

texts:
I am currently taking a class in linear algebra at university as an additional elective. The course is generic and followed by students from various disciplines so it is not focused on economics.
We covered the topics of binary vectors and modular arithmetic and our teacher said that these topics will not be a large part of a test and maybe none so I am considering just ignoring them. But, at the same time, I do not want to ignore topics that might later be important when I enter grad school.
Could someone please let me know if binary vectors and modular arithmetic play any significant role in economic studies?


texts: Relative risk aversion and lotteries exercise

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Given a consumer with a utility function, $u(w)$, and a wealth of $w>1000$. Assuming that the consumers relative risk aversion is constant and equal to 1, that is $R_r(w)=1$ for $w>0$, the consumer is facing a lottery that gives him 50% chance to win 1000 and 50% chance to lose 1000.

My question is, how much is the consumer willing to pay to avoid this lottery, and how does it depend on $w$? I can't seem to figure it out, and I really have no idea where to start.


texts:
I am trying to  generate PMdist`i' variables, using the following codes
display "************** PM10 distances **************"

forval i=1/12599 {
    display "Attempting to compute distance `i'"

    capture geodist latitude longitude latitude`i' longitude`i' [if] [in], generate(PMdist`i')

    capture replace PMdist`i' = . if (PMdist`i' > 257 & !missing(PMdist`i'))

    capture drop latitude`i' longitude`i'
  }
egen PMmindist = rowmin(PMdist1-PMdist12581)

forval i=1/12599 {

    capture drop PMdist`i'
}

Can anyone tell me why its not working and what is the alternative solution?


texts: Graduate Level Textbook on Labor Economics and Macro-Labor

texts: What would be good textbooks at the graduate level that deal with Labor Economics and Labor-Macro (As in, Equilibrium Unemployment Theory, Shimer Puzzle etc)?


texts: Finding Bertrand equilibrium with no demand function explicitly given

texts:
Two cell phone companies A and V are located at the extremes of a line of
length one and transportation cost t = 4. Consider an initial situation where both firms offer a generic phone that consumers value the same (except obviously
for the transportation cost.) Marginal cost is zero.

*N = 800 denote the total population,
show that profits for each firm will be 1600

How do I interpret the demand function for this example?


texts: Example of a (not quasi-linear) production function whose inputs are not perfect substitutes but are not asymptotic at the axes

texts: I'm looking for an example of a family of production functions indexed by, say, rho, where the inputs become closer and closer to perfect substitutes as rho approaches 1, and yet, the marginal product of, say, L, approaches a finite limit as L approaches 0.   Of course one can construct quasi-linear production functions that exhibit this property for one input, but their behavior is really awful. One would think that CES production functions might exhibit this property, since their limit is an affine function,  but they don't.   Indeed, clearly, any production function in which L is raised to a power < 1 is going to give me  the same problem.    Any suggestion would be very much appreciated.