texts:
I am looking to calculate and explain abnormal returns (AR) on dividend announcement events:

Regression:
R = a + B(MarktReturn) + e
E(R) = a + BMktReturn

Therefore AR = R-ER

To explain the AR, I want to test few hypothesis so I do another regression with CAR (CAR=cumulative AR):

CAR =  a + B1(Size) + B2(0-10%Increase) + B3(10-25% increase)+B4(25+ Increase)

0-10% increase is a dummy variable that takes 1 if the dividend increase amount was between 0-10%, 0 otherwise.
10-20%% increase is a dummy variable that takes 1 if the dividend increase amount was between 10-20%, 0 otherwise.
Same logic for 25+ Increase.

Is my method coherent/valid with what I am looking to achieve?

Thank you


texts: Is there a country in the world not in debt?

texts:
This morning I read the following article:

https://www.bbc.co.uk/news/business-49961301

It got me thinking, is there any country in the world not in debt? I am aware that debt is good for a country, but to what extent? I am fairly uneducated in this area so please educate me!

Thanks in advance.


texts: Is there any specific distribution that is recommended for modelling individual income?

texts:
I'm a statistician and my colleagues work with income data every now and then, but they usually apply some arbitrary cut-off and go with logistic regression.

I know there's an infinite range of positive support distributions that could work, but I'd like to know if there's something in particular that is supported by economic theory (or perhaps empirical success).


texts: Want to read more about medical intellectual property and the TPP

texts:
I'm trying to find information about the current state of medical IP protection in countries willing to sign the TPP and the change they will go trough and maybe some impact analysis.

I was hoping maybe i would catch someone currently swimming in this stuff right now and willing to share knowledge or links to valid informaiton


texts: Selling my software suite to another company (acquisition)

texts:
I am trying to calculate a price to sell my software suite to another company. Let say my revenue is \$500,000 a year with only about \$50,000 costs each year. The rate of growth of revenue has been 20% per year.

Any idea how I should price my software?

The buyer might be a company with between 300-10.000 employees and making billions.

Please excuse me for being a novice - I am just a developer. Also, any links to further information is highly appreciated.


texts: I'm trying to understand national debt. I gather that the United States, and other nations with central banks, accrue debt basically by printing new money at their central bank. This, I hypothesize, is to avoid giving private banks too much power. What I'm having trouble with is understanding the interest rate on these "loans". Given the peculiar circumstance of the arrangement, the national debt provides a way to monitor the possible inflationary effects of printing new money. It is paid back only as a way to take money out of circulation, and/or to allow the government to solidify wealth created by the economic stimulus, and to invest it abroad. But there's no apparent reason for one part of the government to charge another part of the government interest, so far as I can tell -- unless it represents something else. So what is the interest rate doing? And is there something I'm missing in my explanation?


texts: What exactly is certainty equivalence in the context of DSGE models?

texts:
I keep reading about certainty equivalence in the context of DSGE models.
I understand that it has something to do with "Getting rid of the expectation operator", but I'm not entirely sure? What exactly is "certainty equivalence" in the context of DSGE models?
Do we have certainty equivalence if the solution to a stochastic model $M_S$ is the same as the solution to the non-stochastic model $M_N$, if $M_N$ is obtained by taking the equations of $M_S$ and simply removing the expectation operator and the random shocks?

EDIT: I just read in the Dynare user manual, that a first order taylor approximation of a DSGE model has "certainty equivalence", because future shocks drop out when you take the expectation operator. Yet current shocks do not drop out, as we can see in the following equation:

Note the $u$ at the very end. This denotes the current-time shock.

So if this is a "certainty equivalent model", but we still have an exogenous shock, then what does certainty equivalence mean? Apparently it doesn't mean "the absence of uncertainty" since there is still an exogenous shock.


texts: How does Global Saving Glut flood the market with cash?

texts: When I was browsing the internet last night, I read a couple articles on the Global Saving Glut. And many has ascribed it to be a cause of US financial crsis. My question is how so? The articles argue that huge saving from abroad flooded the US with cash and drives down the interest rate and in turn encourage riskier investment. However, we know that the US dollars abroad are payments from the US. In other words, the dollars foreigners lend to the US comes from the US. So even if there is not a saving glut, US will still have the same amount of cash availiable because then US does not have to pay for the current account deficit. So it feels to me that the availiable cash did not change. Any suggestions please?


texts: Dynamic model calibration of rate parameters

texts:
Let's say I have this dynamic model where $\delta$ is the depreciation rate of capital $K_t$:
$$K_{t+1}=sY_t+(1-\delta)K_t$$
Now, if I'm going to make some analysis where I state time $t$ as being in years, and I decide to calibrate my model with some bibliographical reference that propose that the value of depreciation rate is, say $0.01$ monthly. Given that I structured my model as being in annual periodicity, I could use financial mathematics formulas of rate conversion to get this rate from monthly to annual (given that this is a compounded rate):
$$\delta_{annual}=(1+\delta_{monthly})^{12}-1\implies \delta_{annual}=(1+0.01)^{12}-1\approx 0.1268$$
Then, I might use $0.1268...$ as my model's depreciation rate for capital in annual periodicity. Is this right and keeps the necessary rigorousness of economic analysis standards or is there another way it should be done?
PD: I'm conscious that the exponent of the formula really depends on the month we're at (say January should be really 31/365, if this year is not leap, etc.), but since overall any given year always have 12 months in our current calendar system, I assume the power of 12 to be a good approximation.


texts: Simple arbitrage model of a single commodity

texts:
Maybe, my question is a little chaotic. I want a mathematical model to describe the  arbitrage of a single commodity.

As I know , if I have much money, I can buy out or buy most of some commodity, such as apple. Then, the price of apple will go up.  Next, I sell my apple at high price. Seemly, I can make profit by this method. But, in fact, there are some question. When I bulk sell my apple, the price will decline quickly, so, I make profit a little or loss.  But if I slowly sell my apple, the new apple will be produced, the price decline too, although decline slow, but I need more time to sell my apple, as time go on, the price will return to normal, so I still make profit little.

Obviously, this process has not a clear expression by language. So, I guess there must be  a mathematical model to describe this process. What is the relation of supply, demand, price, and what is the best method of arbitrage ?  What paper or book I should read ?


texts:
What are “passports” in the context of financial services?

I have also heard the term “passporting rights.”


texts: What are some historical examples of laissez-faire capitalism?

texts:
I suspect both supporters and detractors of laissez-faire capitalism have some historical examples in mind that they consider reasonably close to an ideal or to a "natural experiment". (The examples used by supporters vs detractors might not actually be the same though.)

The Wikipedia article I've linked to discusses at length the history of the concept itself, but I'm having trouble finding a discussion of examples of the realization of the concept in there.

So, do these examples exist in literature? If so, what is the pro/con angle on them?


texts: Feasible approaches to allocate n unique indivisable items among n individuals

texts:
Suppose I have n individuals and n unique, indivisible objects of potential value. I want to allocate those objects so as to make total welfare as great as possible, subject to the constraint that no single individual is hurt too badly by the allocation.

Now, if this were a voting situation where we were choosing a single policy, one approach would be to use the Borda count (BC) The BC is sometimes said to promote consensus, as it considers the rankings of everyone in such a way that it rarely selects an outcome preferred by the majority if there is a substantial minority that can not live with it.

It is also pretty easy to understand and to administer. It produces an outcome from rankings (semi-strict directed graphs (ties allowed) over each person's own allocation (only), without requiring inter-personally comparable cardinal utility. As a result, it is most justified when individuals can be said to hold their preferences with comparable intensity, or if we choose to regard them as comparable because we believe that everyone's preferences should be given equal weight.

So my question is whether there is a feasible algorithm to allocate n items among n individuals in such a way as to maximize the BC. Assume that n is large enough that a brute force approach of testing every possible outcome is infeasible.

I would also welcome pointers to other algorithms likely to produce comparably good results overall with a lower computational cost.


texts:
I am stuck on a multiple choice question that came up on a Micro university past papers.

The question is:

  Marshallian demand curves derived from utility function: $U = log(x) +
log (y)$. What is the own price elasticity, cross price elasticity,
  and income elasticity?

The answers are -1, 0, and 1 respectively, yet I don't understand how.

Many thanks!


texts: What are the 'best' variables out there to forecast accurately GDP and inflation according to macro literature?

texts:
What are the best variables out there to forecast accurately GDP and inflation according to macro literature?

I'd like to forecast the next quarter, not the long-run.

Some time-series ideas I gathered:

industry production
employment
important export-import partners production
business confidence indexes (e.g. INSEE)


texts: Why do sale of used goods do not add to income of a country in a particular year? If you think of income as the inflow in your bank account. All outflows are just expenditures. So I think of income as how much stuff can someone buy in a particulat year. Lets say person A bought a football for 50 dollars. Someone's income is increased by 50 dollars. So currently total income of society is 50 dollars in the current year. Now the guy who bought it sells it for 30. His income in this year is 30. All outflow is expenditure, in other words you are making use of your income. It does not really reduce income. So total income of society in this year should be 50 + 30 = 80? What is wrong with this logic?


texts: When to prefer maximisation of surplus and when instead to prefer minimising differences in price and q to find market equilibrium?

texts:
Two alternative approaches to compute a market equilibrium (in static analysis) are either to minimize the differences (either using abs() or a quadratic diff) between supply-demand quantities and prices in a given market or maximise the total surplus.

Which are the advantages of these two approaches and when to prefer one over the other?

I noticed that many partial equilibrium models (e.g. 1, 2 (p 42)) use the max surplus method, but I wonder why.


texts: What mathematical structure or formalism can be used for modelling strategic investment decisions of agents in the context of competition?

texts:
I'm trying to analyze the decisions of agents in investing scarce resource like time and money into developing their product/service/offering in the presence of competition. I need to know what kind of mathematics can be used to describe this process, either analytically (preferably) or in the form of an simulation algorithm. Also, I'm working in the context of the Web and the Internet.

For example:

Suppose each agent has two possible strategies:

Strategy A, or S(A), consists of a high investment cost, which has high returns in the absence of competition or other possible adverse factors.
Strategy B, or S(B), is a low investment strategy, which comes with smaller returns that are more predictable.

In each possible strategy, there is an option of which products to produce, and also how much to specialize by differentiating these products. Each product has its own cost/benefit profile, i.e. the level of demand for each differentiated version of the product is different, and so is the cost of producing it.

I would like to know how to model situations like the above.

Specific questions I have in mind are:

Is there an equilibrium that can be reached?
What are the conditions under which each agent would have the incentive to invest as much as possible?
What does the equilibrium look like, in terms of levels of investment and specialization.

Example reference:

"Media, aggregators, and the link economy: Strategic hyperlink formation in content networks" by Chrysanthos Dellarocas, Zsolt Katona, William Rand

I found the above paper very illuminating. I would like to find more work along these lines, but haven't been very successful at tracking down any.


texts:
I am struggling with something as simple as real exchange rate calculation!

I get the theory: RER = NOM * (P*/P) i.e. nominal exchange rate times price level ratios. Apparently, using CPI (consumer price index) is common practice for P.

I have the nominal exchange rate and I have both CPI for country A and country B as index 100=2005.

What I don't understand is that in 2005, the nominal rate = real exchange rate. But that makes sense only because of the 2005 index - not in the real world. What am I doing wrong?


texts: How do I calculate quantity to minimize long-run average total cost?

texts:
I have a formula for the long-run total cost curve,

$$TC(Q) = 6000Q + 40Q^2 + Q^3$$

and I'm trying to find the quantity that minimizes the long-run average total cost.

I assume I'm trying to find the value $Q$ (quantity) that produces the total cost ($TC(Q)$) where $\frac{TC(Q)}{Q}$ is the lowest. But how do I do this short of trial and error?


texts: Market Value Changing in Response to News

texts:
On May 24th the DJIA dropped and the news has been attributing it to Donald Trump's cancelation of a talk with North Korea (see image below).

My understanding is that the companies making up the DJIA haven't lost any substantial amount of money because of this decision-so why has the DJIA fallen?

In general,

How & Why does this news negatively effect the US economy when the overall value of companies haven't declined?


texts:
I am trying to understand the logic behind Lucas attempting to analyse the potential benefits of eliminating business cycles by attempting to calculate the percentage of income that individuals would be willing to pay to eliminate such cycles/fluctuations;
My understanding is that Lucas proposed measuring the cost of business cycles as a percentage of consumption that would make a consumer indifferent between a world with and without business cycles - and that, this was found to be an unrealistically small proportion, from which it may be concluded that business cycle fluctuations are not very harmful for welfare(?), economic growth(?) etc.

However, how exactly is the impact of business cycles quantified in such a framework? In other words, if business cycles are so severe that many people lose their jobs, then if they were aware of this possibility, they'd pay a far greater insurance not to lose their jobs, i.e. to live in a world with no business cycles.


texts:
I was given an English task in which the teacher has asked us to do a presentation/speech on Capitalism. The thing is he didn't specify which aspects (historical, economical and the political) we should be focusing on as the concept is rather vague. Thus, I was wondering if anyone here could suggest some points that the presentation should contain (we'll be using slides), and some references (movies, books and videos) so as to enlighten the class more on the concept with simple ideas. Thanks in advance.

PS: I don't study history nor economics nor politics, so the presentation will be just for general culture.


texts:
Suppose that a firm has a total cost function given by:
$TC(q) = \frac{5}{q+1} + 5 + 5q + q^2$.
What is the fixed cost?

I seem to be able to come up with two "answers", which cannot be correct. My hunch is that it is because I do not have a precise understanding of what a "fixed cost" is, as silly as that may sound.

Option 1
Fixed cost is the cost of production when $q = 0$. Evaluating $TC(0) = 10$. Thus, fixed costs are $10.

Option 2
Intuitively, fixed costs should be any term in the in the cost function that are not transformed by "q" in some way, since fixed costs should remain "fixed" and independent across any level of production. This would imply that fixed costs are $5.

I think clearly there is something I am missing here since there should be one answer. Can someone help me understand what the correct answer is and where exactly where I am going wrong with my reasoning for the incorrect option? Thank you!


texts: Is there inverse relationship betweet prices of interest-bearing assets and the interest rate?

texts:
I was wondering about why investors converting out of interest-bearing assets into money in the money market cause the interest rate to increase. Then I remembered that there is inverse relationship between prices of bonds and the interest rate. In case of bonds investors converting out of them would increase their supply, consequently lowering their prices. But lower prices of bonds mean higher de-facto interest rate for your investment into bonds because the quantity of money that you needed to make investment has decreased. Then it happened to me that the same logic can apply to interest-bearing assets in the general, not just to the bonds. And if it's correct it can serve as an explanation for exact mechanism of for increasing interest rate in the money market.
Am I correct about the relationship? Is there inverse relationship between interest-bearing assets and the interest rate? And if not, why?


texts: Are bank reserves part of M1 or only part of M2, and why?

texts:
(1) Toyland earns $$100,000 revenue in cash this week.  Toyland managers use this $100,000 to pay down a short-term loan from Bank One.  Bank One keeps the cash in reserve.   As a result of this transaction M1 [x] and M2 [y]

(2) Bank of America takes $25,000 from reserves and makes a loan to Sissy.  Sissy uses the funds to purchase a Mini Cooper.  The funds are then deposited in the car dealer's checking account.   As a result of this transaction M1 [x] and M2 [y]

The answers for these 2 are:

(1) [x] = decreases, [y] = decreases

(2) [x] = increases, [y] = increases

I had gotten both of these questions incorrect because I considered Bank Reserves to be that part of the money that the money keeps in vaults, etc. in a fractional reserve system.
Usually the bank reserves would be considered about 10% of the total bank's worth.
Am I correct? Or wrong? If so, why?


texts: 'Taxes less subsidies' included in income approach of GDP

texts:
Why is 'taxes less subsidies' a part of the calculation of GDP (income approach)?

Is it because in the expenditure method of GDP, consumption expenditure will exceed those of the total "wages and profit of firms"?


texts: What's the term for consumers not being able to pay their mortgage?

texts: Is there a term for not being able to pay your mortgage(s)? Like "personal bankruptcy", "consumer default" or something like that?


texts:
In the figure below, I have a coordinate system where $r$ depends on $I$ or $S$, but I do not completely understand why I can have multiple functions inside this coordinate system.

Why can I write $S(r)$ and $I(r)$? Normally, in an x-y-diagram, I interpret it as $y(x)$, since $x$ varies and $y$ depends on $x$.

The diagram below is a quite normal diagram in economics, so I know it is correct, but why isn't the figure 'transposed', i.e. with $r$ on the $x$-axis and $S,I$ on the $y$-axis?

It doesn't make sense that $r = S(r)$ or $r = I(r)$.


texts: Where to find a list of marketplaces (NYSE,LSE) and the financial products they offer?

texts:
I'm looking for a list (csv/json/api...) of all marketplaces (New York Stock Exchange...) and the financial products that are offered on those market places.

Preferrably worlwide but US and EU will be fine.
A small description of products with their fields (PHARMA, TECH, AGRO...) will be greatly appreciated.


texts: How is employment related to aggregate demand and aggregate supply?

texts: When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?


texts: real or nominal GDP to compare to wage price index?

texts: The recent Australian budget projects trends over the next four years.  I'm looking at a summary here.  If I want to calculate the share of GDP going to wages, should I compare the percentage changes in the Wage Price Index to the changes in Real GDP or Nominal GDP?


texts: A doubt on the Regression of Mankiw, Romer, Weil 1992 paper

texts:
I'm trying to replicate the regression of the MRW 1992 paper.
(Here's the data, if you're interested)

In the same page where the data set is available, there's this handout explaining how to replicate the results. In page 2 of this handout, we can see two simple stata commands:

li_y=ln(i_y/100)
 g lpop=ln(0.05+popgrowth/100)

My question is why the variables i_y (this is Investment over GDP), and popgrowth(this is an averaged population growth rate between 1960-1985) are divided by 100?

Nowhere in the MRW 1992 paper, do I read something telling me that it's necessary to divide it by 100, or do I?

Any help would be appreciated


texts:
I am trying to prove that AC is mininimized when AC=MC

This is how far I am:

FOC:

Showing what I want to prove

SOC:

This has to be positive in order to ensure that AC is minimized, but how can i conclude that?

Hope someone can help :)


texts: What to include in a unit economics calculation of a car rental business?

texts:
I'm doing a unit economics per order calculation on a car rental business and I'm not sure what costs should I include in it. So far I have added CAC, maintenance, labor, car depreciation.
Should I also add a cost for the days when a car is not rented out?
Like a cost for unutilized resources.
What other costs should I include?


texts: Does a General Equilibrium here require Pareto Optimality?

texts:
There are two consumers $A$ and $B$, and two producers $X$ and $Y$. he consumers are endowed with labour(L) and capital(K) $L_A,K_A$, and $L_B,K_B$ respectively. The preferences of the two consumers have the utility functions $U_A=X_A^4Y_A$ and $U_B=X_BY_B$. The technologies of the two producers are given by $X=\sqrt{K_XL_X}/2$ and $Y=2\sqrt{K_YL_Y}$. Setting the wage rate $w=1$, what are the competitive general equilibrium relative prices?

This is inspired from a homework problem, but I wish to understand how to solve this general class of questions. Does this require pareto optimality? How does calculus feature in this question? Any help would be great! Thanks.


texts: Is the loan principal ever delivered in pieces over time?

texts:
Not sure if this is the right place for this question but it's more of a theoretical finance question than a personal finance question.

So a loan has a principal amount that is given to the borrower in a lump sum, and the borrow then pays back that amount plus some interest. For example, let's say that George loans \$100 to Fred at 10% interest over 10 months. Fred then pays back at \$11 a month and is debt free at the end 10 months.

Is it ever the case that George lends the money in increments instead of a single lump sum? That is, George pays Fred \$20 a month for five months, while at the same time Fred pays back at \$11 a month for 10 months.

I ask because this would be less useful to Fred but less risky to George.


texts: Homothetic preferences and weak separability

texts:
With 3 goods (x,y,z), linear Engel curves, where z is separable of x and y, and with all first derivatives are positives and second negatives.

Does the demand of z change with the price of x or y? So, is z independent of $p_{x}$ and $p_y$?

I think so, because I have made some examples where changing prices didn't change the optimal amount of z. However I cannot find a formal proof.


texts: What's the combined wealth of the US banks?

texts:
How much is the amount of money of the US banks?

In terms of:

assets
their own money (the banks make profits and they can keep the profits for further investments)

The question is only about the banks. No retirement funds, no venture capitals, no other kind of financial institutions.


texts: Relationship between convexity and a perfect complements type utility function

texts:
Consider someone who consume two goods and hates them both.
Given the utility function:
U(x,y)= -max{x,y}
1.What would be the shape of the indifference curve?
2.Why are these preferences weakly convex?
3.What does the negative sign imply mathematically?
4.Will it become an min{x,y} function?


texts: How exactly does money supply causes inflation?

texts:
I think there's consensus among economists that a growth in money supply (I'm not thinking in any particular type of money supply) causes inflation (CPI), at least, in the long run.
What I'm interested in is the exact mechanism for that phenomenon. How "printing more bills" makes the price of, say, milk in the local supermarket raise? How does the people who set prices know that there's more money in circulation than before so it's time for a raise?

Thank you in advance.


texts: Does scarcity apply only to commodities?

texts:
I feel like Wikipedia may be misleading me in a subtle or egregious way.

The very first line of Scarcity is:  "Scarcity is the limited availability of a commodity..."

It does, of course, helpfully provide that "a commodity is an economic good or service that has full or substantial fungibility..."

My question, then, is:  Does it really make no sense in economics to discuss the scarcity of non-fungible goods?

(In the interest of full disclosure, my interest in the subject is mostly related to thinking around whether post-scarcity has anything at all to say about non-commodities, but that's quite a different set of questions.)


texts: About intertemporal elasticity of substitution

texts:
The inter temporal elasticity of substitution between two periods of time is $$\sigma=-\frac{d[\ln(c(s)/c(t))]}{d[\ln(U'(c(s))/U'(c(t)))]}$$ I need to prove that $$\lim_{s \to t}\sigma = -\frac{U'(c(t))}{U''(c(t))c(t)}$$
So, I have the following by the definition of total differential:

$$\sigma=-\frac{ \frac{dc(s)}{c(s)}-\frac{dc(t)}{c(t)}}{ \frac{U''(c(s))}{U'(c(s)}dc(s)- \frac{U''(c(t))}{U'(c(t)}dc(t)  }$$  Then if $s$ tends to $t$ we have an indetermination $0/0$ so, we use L'Hôpital Rule. That is my problem, I don't know how to derivate with respect to $c(s)$.


texts: Can an F-test be used in a regression that is quadratic, or can it only be used in a linear regression model?

texts: My regression I'm testing is quadratic but everything I've read about using F-tests state that it is used in a linear regression model.


texts: Why does price elasticity of demand formula work?

texts:
Hi there,

I understand how to use the price elasticity of demand formula (mid-point method), shown in the picture above.

However, I'm not too sure why exactly it works.

Why are dividing the change in quantity and price by the averages of the quantity and price change? Is that a way of calculating the percentage change?

And why is elasticity a fraction and not a ratio? Would it be better to write: as price changes by 5 percent, quantity decreases by 10 percent, and write that as 5:10?


texts: Why does any treasury / central bank hold gold?

texts:
I know the US treasury is slowly selling its gold reserves, but what is the actual mission and purpose when it comes to the holdings?

What is the reasoning behind the slow rate of liquidation? I have even heard "tradition" and "propping up confidence" as reasons. Tradition doesn't feel like more than an excuse. Confidence or creditworthiness should stem from the expected performance of the US economy and tax collected on that activity, since treasury securities are not backed by gold.


texts: Static wage posting model and indifference to wage levels

texts:
Suppose a monopsonistic firm has the following simple profit function:
$$\pi (w) = PL(w) - wL(w) $$
where $L(w)$ is the labor supply, $P$ is the constant output price, and it has a linear production technology.

What is a labor supply schedule $L(w)$ that would make the profit function insensitive to the wage?


texts: What does Adam Smith mean when he says wages are determined by: "advancing, stationary, or declining state of the society."

texts:
I'm reading the Wealth of Nations. Smith explains in Book One that wages for labor are determined not by how wealthy a nation is but rather by its rate of growth. At the end of chapter seven he introduces the topic with this:

  First, I shall endeavour to explain what are the circumstances which
  naturally determine the rate of wages, and in what manner those
  circumstances are affected by the riches or poverty, by the advancing,
  stationary, or declining state of the society.

  Smith, Adam. The Wealth of Nations (p. 24). Neeland Media LLC. Kindle
  Edition.

In chapter 8 he goes into detail on this. Introducing an extensive section of examples of advancing, stagnating, and declining societies and the relative hight, mediocrity, and poverty of wages (respectively), he says:

  It is not the actual greatness of national wealth, but its continual
  increase, which occasions a rise in the wages of labour. It is not,
  accordingly, in the richest countries, but in the most thriving, or in
  those which are growing rich the fastest, that the wages of labour are
  highest.

  Smith, Adam. The Wealth of Nations (pp. 26-27). Neeland Media LLC.
  Kindle Edition.

His picture of the stagnating society looks grim enough, with the average laborer having barely enough to feed his family:

  If by digging the ground a whole day he can get what will purchase a
  small quantity of rice in the evening, he is contented. The condition
  of artificers is, if possible, still worse. Instead of waiting
  indolently in their work-houses for the calls of their customers, as
  in Europe, they are continually running about the streets with the
  tools of their respective trades, offering their services, and, as it
  were, begging employment.

  Smith, Adam. The Wealth of Nations (p. 27). Neeland Media LLC. Kindle
  Edition.

His picture of a declining society is hard for a sympathetic person to read:

  The lowest class being not only overstocked with its own workmen, but
  with the overflowings of all the other classes, the competition for
  employment would be so great in it, as to reduce the wages of labour
  to the most miserable and scanty subsistence of the labourer. Many
  would not be able to find employment even upon these hard terms, but
  would either starve, or be driven to seek a subsistence, either by
  begging, or by the perpetration perhaps, of the greatest enormities.
  Want, famine, and mortality, would immediately prevail in that class,
  and from thence extend themselves to all the superior classes, till
  the number of inhabitants in the country was reduced to what could
  easily be maintained by the revenue and stock which remained in it,
  and which had escaped either the tyranny or calamity which had
  destroyed the rest.

  Smith, Adam. The Wealth of Nations (p. 28). Neeland Media LLC. Kindle
  Edition.

I am a layman to economics. My question to the community is: is this still generally accepted economic theory? Can a "static" society not expect high wages for labor but rather expect generally decreasing wages for labor until they fall to barely subsistence levels? Can we only expect high wages for labor in countries with every increasing productivity? I know this is science, so you kind of have to take it as it is, but I admit this seems grim to me.


texts: In the Ricardian model, why are two out of 3 cases invalid?

texts:
I am considering the Ricardian model.

There is an economy with two countries $S,T$. Two goods $a,b$. Each country has linear production technology with labor ($\ell$) as only factor of production.
$$y_i^j=\alpha_i^j\ell$$
where $i \in \lbrace a,b\rbrace$ and $j \in \lbrace S,T \rbrace$.

$$\ell_S + \ell_T = 1$$

The firm's maximization problem is

$$\max_{\lbrace \ell \rbrace} \pi^j_i = \alpha_i^j\ell p_i-w^j \ell$$

There are 3 cases to this problem

Case 1: $p_i^j \alpha_i^j <w^j$

$\ell = 0$

$y_i^j = 0$

Case 2: $p_i^j \alpha_i^j > w^j$

$\ell = 1$

$y_i^j = \alpha_i^j$

Case 3: $p_i^j \alpha_i^j = w^j$

$\ell \in [0,1]$

$y_i^j = [0,\alpha^j_i]$

My Question

Apparently, cases 1 and 2 aren't valid. I'm not sure why. Can someone explain?

The logic is supposed to be

  "if there is complete specialization then $\ell_S = 1, \ell_T = 0, y_T = 0$ or $L_S = 0, L_T = 1, y_S = 0$, so therefore cases 1 and cases 2 fail"

I just don't understand this explanation at all and would like a better explanation. What does it mean to "specialize completely"?


texts: Bayesian Nash Equilibrium in a Duopoly Cournot Competition

texts:
I am having a hard time to solve a Bayesian Nash equilibrium game in a duopoly cournot competition setting. So, I have two firms with given production quantities, let's say $q_1$ and $q_2$ (i.e., not a decision). Firm 1's product is low quality whereas Firm 2's product is high quality with probability $\theta$ and low quality with $1-\theta$. As a result, different quality products have different market potential for Firm 2. The way I set up the price function for low quality is
$$M-q_1-q_2$$
For high quality products, there is a price premium such that the price for high quality is given by $$\alpha M-q_1-q_2$$ where $\alpha>1$. Another different aspect of the problem is that companies first sell products in the primary market under the price mechanism specified above. There exist a secondary market. It works in a way such that if any firm sells his (remaining) products there, he gets a guaranteed price $m$ ($M > m$).
Currently my solution involves 8 different cases. I solve Bayesian Nash equilibrium by solving three profit functions simultaneously to find the quantities to supply in the primary market. Since $q_1$ and $q_2$ are treated fixed, I need to have a $\min \{q_i, \hat{q}_i\}$ for $i=1, 2H, 2L$, where $\hat{q}_i$ is the equilibrium solution for the primary market. But I am trying to narrow the cases down to a small set so that I can continue my other analysis with the solution. Accordingly, I have two questions: 1. Is my current solution correct? 2. How can I narrow cases down to a manageable number?
If you wonder what my equilibrium solution looks like for primary market, here it is.
$$\hat{q}_1 =\frac{M-m}{3}-\frac{\theta (\alpha M-M)}{3}$$
$$\hat{q}_{2L} =\frac{M-m}{3}+\frac{\theta (\alpha M-M)}{6}$$
$$\hat{q}_{2H}^M = \frac{\alpha M-m}{3}+\frac{(1+\theta)(\alpha M-M)}{6}$$


texts:
Suppose we have the following four lotteries:

$L_{1}=[(1,\$1)]$

$L_{2}=[(0.01,\$0),(0.89,\$1),(0.1,\$5)]$

$L_{3}=[(0.9,\$0),(0.1,\$5)]$

$L_{4}=[(0.89,\$0),(0.11,\$1)]$

If our agent says that he prefers $L_{1}$ to $L_{2}$ and prefers $L_{3}$ to $L_{4}$, then he is not following the expected utility assumption of independence (also known as substitutability).

Anyone know how to explain this?


texts: How to derive the reaction function from these provided variables?

texts:
This is the question. I cant seem to reach a concrete solution because of the scarce information.

Firm 1 spends 2 million, plus 33.33% on advertising what firm 2 spends on and firm 2 spends $7 million plus 12.5% of what firm 1 spends. Draw the reaction functions and label them from the provided information.

I want to know the exact procedure on such problems.


texts: Are Trade Blocs regionalism rather than Globalisation

texts: While studying globalisation, The subject of Trade Blocs was brought up, with hindsight, I wondered, aren't Trade Blocs fostering regionalism (as in devotion to the interests of one's own region) as opposed to globalisation? Trade blocs are anti-free-trade since they are essentially barriers to trade from nations outside of the bloc. Since Globalisation is "developed" through free trade as opposed to "regionalisation" of Trade, then are Trade Blocs regionalism and thus anti-Globalisation?


texts: Why is elasticity not defined simply as the slope of the graph?

texts: It makes more intuitive sense to me: as I increase the quantity, this is how much the price changes. Why is a much more complex formula used that takes into consideration the current quantity and price at a given point on the curve?


texts: How do environmental deregulations push an economy inside its Production Possibility Frontier and make it inefficient?

texts: I read in a textbook that if we plot a PPF with automobile manufacturing and clean air as the axes and the company pollutes the state making clean air (a public good) scarce, automobile manufacturing becomes inefficient and the economy works inside the PPF instead of on it. Can you explain why. Shouldn't the automobile manufacturing increase?


texts: Constant Returns in a Production Function $\frac{Y}{L}=\left(\frac{K}{L}\right)^{\alpha}\left(\frac{R}{L}\right)^{\beta}$ ($R$ = Resource)

texts:
In his 1977 article (from which has developed a considerable literature on the Hartwick Rule for maintaining long-term constant consumption given depletion of non-renewable natural resources), Hartwick uses (on p 973) this aggregate production function:

$$x = k^{\alpha}y^{\beta}1^{\gamma}$$

Here (see p 972) $x$ is per capita output, $k$ is per capita reproducible capital, and $y$ is per capita use of an exhaustible resource. $1$ is just the number one, labour being assumed constant (so the term $1^{\gamma}$ seems redudant).  So in more familiar notation (output $Y$, capital $K$, use of exhaustible resource $R$, labour $L$), and glossing over the difference between population and labour, this is:

$$\frac{Y}{L}=\left(\frac{K}{L}\right)^{\alpha}\left(\frac{R}{L}\right)^{\beta}$$

Hartwick then assumes (p 972) constant returns to scale in the form (explicitly on p 973) $\alpha+\beta=1$.

Question: What reasons might justify the assumption of constant returns in the above form?  Isn't it more plausible to assume constant returns when all factors are increased, that is to assume $\alpha+\beta+\gamma=1$ in a production function of the form:

$$Y=K^{\alpha}R^{\beta}L^{\gamma}$$
This does imply the above function since:

$$\frac{Y}{L} = \frac{K^{\alpha}R^{\beta}L^{\gamma}}{L^{\alpha}L^{\beta}L^{\gamma}}=\left(\frac{K}{L}\right)^{\alpha}\left(\frac{R}{L}\right)^{\beta}$$

However, given $\gamma>0$, it is inconsistent with $\alpha+\beta=1$: instead $\alpha+\beta<1$.


texts: Are US-branded products manufactured in China considered Chinese?

texts: Many US-branded products like Apple's are manufactured in China. Are these products considered Chinese when they are imported back to US? And are they thus subject to tariffs?


texts: Jordi Gali Markup Marginal Cost Relation

texts:
Jordi Gali defined price, marginal cost and mark up relationship as

Drago Bergholt tried to reach gali's representation from firm maximization problem.

I think that there is error in derivation.

Can you help me correcting derivation process and obtaining gali's representation ?

Now, is there any derivation error below (last part) ?

is this part ?

Here, in the left side need to be "-" negative  ?

Continue....

Nt and Nit are different?


texts: Why don't governments mandate a wage decrease in recessions?

texts: I have an amateur interest in economics so forgive me if I display my ignorance. From my understanding, both in the Keynesian and monetarist theory of recessions, the recession occurs because aggregate demand decreases and wages are sticky/rigid. Measures like quantitative easing or government stimulus spending try to raise the level of aggregate spending relative to these "sticky" wages. However, what is to prevent a government taking a much more direct method and just mandating a wage cut throughout the whole economy? Wouldn't this be far more effective and far less prone to abuse than fiscal or monetary stimulus?


texts:
I apologize if this is gonna be very basic, but I am a beginner. My question is: why do markets (expressed as indices) grow? Is it because money is constantly moved from the real economy into stock markets, but the ingoing flow surpasses the outgoing flow?

Suppose no money can flow in or out a market, besides what is already in. Would that market (or a stock index that represents that market) just reach a dynamical equilibrium? I would say yes, but please correct me.


texts: Why are anti-dumping duties considered to be non-tariff barriers to trade?

texts:
English is not my first language so sorry in advance!
please help me on this one I can't find a good answer, and until I have understood this one, I won't get the whole non-tariff barriers to trade thing.
so I've read a lot about duties being tariff barriers to trade.
but then I've read about the anti-dumping duties which are, despite being duties, non-tariff barriers to trade, and now I don't know why?
I'm hoping someone here could explain that to me.
Also, one question additionally, are duties based on personal preferences, e.g. political motivation, also non-tariff barriers to trade?
let's say I put a smaller duty on the product manufactured by a company that is owned by a "political partner".
the parameters here are political usefulness and thus not directly correlated with trade.
is that a non-tariff barrier to trade then?
hoping for answers, thanks!


texts: The Insane Sultan of Slickcrudistan: Calculating Currency Equilibrium

texts:
I work for a start-up that has encountered an economics problem no one on our team has been able to crack.
A story form and a general form of the problem are below. I believe they are equivalent, but if there is a difference, please defer to the general form.
We understand there is no precise answer to this question and that the value of any currency considers prices in other factors that this question ignores. Still, we figured, or hoped, that there was some general way of approximating this, even if it's under idealized conditions. Thanks!
Story Form

The sultan of Slickcrudistan has gone insane. He has decreed that his country will only accept pre-2015 sand dollars in exchange for oil1. Barrels of oil will be sold to the bidder offering the most sand dollars per barrel. Additionally, the sultan is willing to sell sand dollars back to the public at approximately the current US dollar to sand dollar exchange rate.
His country produces 20,000,000 barrels of oil at a market value of $1,000,000,000 USD/year. Additionally, 100,000,000 pre-2015 sand dollars exist. Assuming liquid and efficient markets, what is the equilibrium price of a sand dollar? How would this change if there were a stable inflation in the quantity of sand dollars?
1 Suppose an extremely cheap process exists for verifying this.

General Form

Currency X has a total circulation of a units and a stable inflation rate of currency units of m percent.
Currency Y has a total circulation of b units and a stable inflation rate of currency units of n percent.
Currency Y is completely debased and of no value in comparison to currency X (at market exchange rates, b << a ).
A market with a value of c units per year in currency X can now only be transacted in a currency Y. c is growing at a stable rate of p percent.
Assuming liquid and efficient market, what is the new equilibrium of exchange?


texts:
I need a list (or separate lists) with average prices of precious metals (gold, silver, platinum, palladium, etc.), by year. I prefer the annual average price or at least the price at the end/beginning of the year and I do not need graphs with prices fluctuations from one day/week/month to another.

Also price ratios (like gold/silver, gold/platinum - e.g. "in year 1900, with 33.33 ounces of silver you could buy one ounce of gold") are very useful for me.

International prices are desired of course, but the national prices are also very welcomed (like historical price of gold in the UK/US/France/Germany or any other country where someone actually bothered to record such facts).


texts:
As said in the title, why is real wage divided by marginal product of labor often called real marginal cost?

In mathematical formula, $mc_t = (W_t/P_t)/MPN_t$ where $MPN_t$ refers to marginal product of labor, $\partial Y_t/\partial N_t$ and $N_t$ is amount of labor. $W_t$ refers to nominal wage, and $P_t$ refers to price level.


texts: What is a suitable exponential to model a currency or cryptocurrency price increase?

texts:
I would like to model a supply and demand cryptocurrency market, not necessarily for Bitcoin, but for any coin.

My difficulty is that I don't know what exponential factor might be realistic to do so.

For example, I was thinking to pick the exponential factor of e to the power of -10 increase per coin, this happens in case you exchange fiat money for crypto.  Same exponential factor applicable for decrease, in case that the reverse transaction is performed.

I searched online, and I can't seem to find a value for this factor, or additionally if it is static or dynamic.

For example, with the above data, if the starting value of a coin is \$300 and someone invests \$300,000 to buy 1,000 coins, the value per coin goes to \$300.0457.

But if someones invests \$3,000,000 the value goes to \$345.7, I am wondering if it is realistic given that the total coin supply is 8 Million for example?

Can someone help and reason about the choices?


texts: I have a function: $ u(x) = x_{1} + x_{2} + \min\{x_{1}, x_{2}\}$. How do we algebraically show if it's convex or not? Also, what would be the general way to show if any given function is convex.


texts:
Can anybody give me a hint how to solve the following problem?

*One way to construct preferences over lotteries with monetary prizes is by
evaluating each lottery L on the basis of two numbers, Ex(L), the expectation
of L and var(L), L’s variance. Such a procedure may or may not be consistent
with vNM assumptions.

Show that u(L) = Ex(L) − (1/4)var(L) induces a preference relation that
is not consistent with the vNM assumptions. (For example, consider
the mixtures of each of the lotteries [1] and 0.5[0] ⊕ 0.5[4] with the
lottery 0.5[0] ⊕ 0.5[2].)*

I am especially not sure about how to compute the variance in this case.


texts: What is the evidence that econometrics has empirical value?

texts:
Economies are extremely complex systems with many variables, not to mention the fact that they emerge from the interactions of complex beings. I agree that economies have certain underlying principles, but I remain skeptical of the overall value of econometrics as a science.

A truly useful econometrics would be a valuable tool in predicting the future behavior of the economy, particularly in predicting shocks like the recent financial crisis and Great Recession. But it did not happen.

If econometrics can't predict the future, how do we know it even effectively describes the past? What is the evidence that it has empirical value?

Clarification

I regret any confusion this may have caused, but let me clarify what I'm looking for here. I regard this as an epistemological question. A better way to phrase it might be, "Can econometrics conform to the scientific method?" or just "Is it science?"

This is, at least in theory, a specific, answerable question, even if it is, as Alecos Papadopoulos noted in his answer, a matter of degree. (A view I share.)

This does not mean that specific examples of econometrics' successes and failures are not relevant.


texts: Why could China, much poorer than US, lend so much money to US?

texts:
The GDP per capita of China is only a fifth of that of US.
But China has lent more than a trillion dollars to US.

How could the much poorer China lend so much money?
Where did those money come from?


texts: How do economists model VNM-rationality violation?

texts:
This question concerns the need to generalise utility maximisation, the fact that it's a special case of a general problem familiar to physicists, and the question of whether economists have affected a similar generalisation or instead taken a different approach. A precise statement of my question is bold below, after some theoretical exposition.

A common model of preferences in economics is that agents choose to maximise the mean of some utility function. If the utility $U\left(x,\,\phi\right)$ depends on a random variable $x$ (possibly containing multiple parameters $x^\mu$) of pdf $f$ and a user-chosen $\phi$ (on which $f$ may or may not depend), we seek to minimise $S:=\int dx\mathcal{L},\,\mathcal{L}:=-Uf$. (I'm using a physicist's notation, but this sort of mathematical problem is common to both fields.) If only $x$ were known (viz. $f=\delta\left( x-x_0\right)$), $\phi$ could be chosen to maximise $U$; the $\phi$ which does this is in general a function of $x$. Generalising to random $x$, the solution is given by $0=\frac{\partial\mathcal{L}}{\partial\phi}$, an algebraic equation that can in principle be rearranged to express $\phi$ in terms of $x$.

Maximising mean utility is equivalent to having preferences satisfying the von Neumann-Morgenstern axioms, but some empirical results such as the Ellsberg urn violate these. One possible explanation is that Knightian uncertainty bothers people, i.e. people prefer investment opportunities with known $f$. (In particular, each of Ellsberg's observed preferences was for a known probability distribution over an unknown one, even though whatever the unknown distribution was at least one of the resulting preferences would produce lower mean utility than the alternative chosen over it.) Whatever the explanation, we apparently cannot assume agents minimise $S$ as defined above.

However, since new models should acknowledge the successes of old ones as much as their failures, a model in the above vein is warranted. When physicists work with such problems, typically $L$ also depends on $\partial_\mu\phi:=\frac{\partial\phi}{\partial x^\mu}$. The $S$-minimising result is then $0=\frac{\partial\mathcal{L}}{\partial\phi}-\partial_\mu\frac{\partial\mathcal{L}}{\partial_\mu\partial\phi}$ (the last term sums over $\mu$), which unlike the previous result is a differential equation. So my question is: Have economists taken this approach? If not, what have they done instead? In particular, I'm looking for a generalisation of $\int dx Uf$ maximisation.

Let me try to make this more concrete. Suppose I'm investing in crops. Then $\phi$ could denote my portfolio, $x$ could denote future weather, $f$ would characterise the long-term climate, and ongoing climate change may present such uncertainty as to result in something analogous to an Ellsberg paradox. In particular my $\mathcal{L}$ might also depend on $\partial_\mu\phi$, my chosen portfolio's sensitivity to a guess about future weather. For example, I might have $\mathcal{L}=-Uf+a\partial_\mu\phi\frac{\partial\left(Uf\right)}{\partial_\mu\phi}$ for a constant $a$. This is just a hypothetical example, since I've not found any economic literature on this.


texts: what is the project monitoring and impact analysis(PMIE)? Can anyone explain basic features of this?


texts: Converging Trajectories and Sufficiency for Optimality

texts:
(The question is loosely relatet to this thread.)

In the paper "Feedback Equilibria for a class of non-linear Differential Games" by Mäler et al. it is stated (p. 14)

  In fact sufficiency is satisfied for trajectories converging to the locally stable steady states of the cooperative solution and open-loop equilibria.

Can someone elaborate on this statement?

Say, I haven't checked for sufficiency. However, I'm able to approximate the saddle path by the first order conditions. That is, the dynamic system converges to the (unique) fixed point for a given initial condition.

Is the sufficiency for optimality then given?


texts: Why does economics use "rent" to mean income from a factor of production that exceeds the minimum amount necessary to beget that factor of production?

texts:
This economics meaning of "rent" is confusing to laypeople because it differs from the lay meaning of "rent" (tenant's regular payment to a landlord for the use of property or land)!
Because "rent" is such a popular word, why do economists still use it? Why not coin a different term to avoid ambiguity?
Rent Seeking - Econlib

But why do economists use the term “rent”? Unfortunately, there is no good reason. David Ricardo introduced the term “rent” in economics. It means the payment to a factor of production in excess of what is required to keep that factor in its present use. So, for example, if I am paid \$150,000 in my current job but I would stay in that job for any salary over \$130,000, I am making \$20,000 in rent.


texts: Why does the Brexit cause a fall in crude oil prices?

texts:
Oil prices have also fallen sharply in the wake of the referendum
  outcome, with Brent crude down 5.2%. The price of Brent crude fell by
  \$2.68 to \$48.24 a barrel, its biggest fall since February. At the same
  time, US crude was down 5.4%, or \$2.69, to \$47.52 a barrel.

From http://www.bbc.com/news/business-36611512

But why does this happen?


texts: Can anyone solve this indifference curve question?

texts:
Draw the indifference curves for a preference relation which is neither monotonous
or strictly convex, yet convex.
My solution was to draw a circle but I'm pretty sure that is wrong.


texts: What was happening in Madagascar during 1971-1996?

texts:
In the course of my research I have been examining these days macroeconomic time series for per capital household consumption, using the databank of the WorldBank. The unit of measure was constant 2005 USD.

I got all shorts: smooth upward trends indicating a steadily increasing material well being on average; series with wild swings indicating socioeconomic turmoil, civil wars, coup d'eta's etc; series with an obvious structural shock in the level which then continued to grow at the same rate (for example Finland experienced such a shock when the Soviet Union collapsed); series suspiciously smoothly increasing, too smoothly to be believable and so suspect of being fake...

Unique among them, was Madagascar: its per capita consumption exhibited a steady downward trend for the period 1971-1996, although after that period the trend seems to (gradually) flatten out. Here is the plot:

Again the unique feature here is the almost constant downward trend. There were other countries that saw their consumption level collapsing in this period, but not in such a steady gradual manner, over a quarter of a century.

Does anybody have a clue as to what was happening in the period in this country? Madagascar was colonized by France in 1896 and obtained full independence in 1960. But of course there are many countries that were colonies and de-colonized around that period; none exhibited such behavior.


texts: If a Chinese person wants to buy an iPhone or any international goods, which GDP per capita would be a better indicator?

texts: Which GDP per capita of a Chinese citizen would better reflect their affordability- Nominal GDP per capita or PPP GDP per capita of China? My question is would PPP would matter much in case of buying and selling international goods and services?


texts: Log-linearizing a non-separable utility function around the steady state

texts:
I've started reading Jordi Galí's Monetary Policy, Inflation and the Business Cycle (2nd ed., 2015). In section 2.5.2, Galí considers an example with the following non-separable period utility function:

$$U(X_t, N_t) = \frac{X_t^{1 - \sigma} - 1}{1 - \sigma} - \frac{N_t^{1 + \varphi}}{1 + \varphi}$$

where $X_t$ is defined as

$$X_t = \begin{cases}
\displaystyle \left[ (1 - \vartheta) C_t^{1 - \nu} + \vartheta \left( \frac{M_t}{P_t} \right)^{1 - \nu} \right]^{\frac{1}{1 - \nu}} & \nu \ne 1 \\
\displaystyle C_t^{1 - \vartheta} \left( \frac{M_t}{P_t} \right)^\vartheta & \nu = 1\end{cases}$$

Galí notes on p. 35 that the household's optimality conditions are

$$\frac{W_t}{P_t} = N_t^\varphi X_t^{\sigma-\nu} C_t^\nu (1 - \vartheta)^{-1}$$

$$Q_t = \beta E_t \left\{ \left( \frac{C_{t+1}}{C_t} \right)^{-\nu} \left( \frac{X_{t+1}}{X_t} \right)^{\nu-\sigma} \left( \frac{P_t}{P_{t+1}} \right) \right\}$$

$$\frac{M_t}{P_t} = C_t(1 - \exp\{-i_t\})^{-\frac1\nu} \left( \frac{\vartheta}{1 - \vartheta}\right)^{\frac1\nu}$$

(these are his equations (37) to (39); here $Q_t$ denotes the bond price in $t$, and bonds are assumed to pay one unit of money at maturity). Galí proceeds to log-linearize (37) and (39) as follows:

$$w_t - p_t = \sigma c_t + \varphi n_t + (\nu - \sigma) (c_t - x_t)$$

$$m_t - p_t = c_t - \eta i_t$$

(each up to an additive constant, and with $\eta = \frac1{\nu(\exp(i)-1)}$.) So far, so good.

Now, on page 36, Galí writes that "[l]og-linearizing the definition of $X_t$ around [the zero-inflation] steady state and combining the resulting expression with (39) [..] yields":

$$w_t - p_t = \sigma c_t + \varphi n_t + \chi (\nu - \sigma) (c_t - (m_t - p_t))$$

with $\chi = \frac{ \vartheta^{\frac1\nu} (1 - \beta)^{1 - \frac1\nu} }{ (1 - \vartheta)^{\frac1\nu} + \vartheta^{\frac1\nu}(1 - \beta)^{1 - \frac1\nu} }$.

I'm an undergrad student, not really familiar with log-linearization techniques yet, and I don't see how this follows, or how one would go about log-linearizing $X_t$ around the steady state in the first place. I've read Zietz's Log-Linearizing Around the Steady State: A Guide with Examples, but have failed in applying the techniques described therein (to the case of $\nu \ne 1$) to match Galí's result.

Could someone be so kind and fill in the details that Galí left out? Thank you.


texts:
I'd like to ask for the main causes Venezuela has sank economically so abruptly, I mean not too long ago it was considered a rich country (well not a world power but a country that could provide some nice standards for living) and now if it continues this way it's gonna get insanely poor. (That's the look that I get from the news).

I've read some things but I'd like a more global explanation of what has happened and I feel that some of those things were biased, some of them maybe a lot, I think here I'll find a more objective answer.

I'm not asking for a detailed description of what has happened as that would be something that could take an entire thesis, but I'd like to know in a brief manner the principal aspects that have caused that.


texts: New Keynesian Phillips curve with time-varying elasticity of demand

texts:
I am looking for a paper or notes which derive the New Keynesian Phillips curve with Calvo price staggering and time-varying elasticity of demand (i.e. markup shocks). Specifically, I am trying to derive equation (2) in https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr782.pdf?la=en.
When I try to derive (2), using the definition $u_t = \ln \frac{\theta_t}{\bar{\theta}}$ they state, I get the same expression but with $- \frac{1}{\bar{\theta}-1}$ as a coefficient on $u_t$.
Thanks!
Edit - if I define $\mu_t = \ln \frac{\theta_t}{\theta_t - 1} - \ln \frac{\bar{\theta}}{\bar{\theta} - 1}$ as the log-deviation in the desired markup from its value in steady state, write $\mu_t$ in terms of $u_t$, and take a first-order Taylor approximation, I get $\mu_t \approx -\frac{1}{\bar{\theta}-1}u_t$. Therefore, I am able to derive (2) in the paper linked above, but only by defining $u_t$ differently (i.e. in the way I defined $\mu_t$. I would still be interested in any derivation of (2) using their definition.


texts: Calculating Consumer Surplus Given Table

texts:
Can someone help me? The answer is supposed to be 36 but I have no idea how they got that answer. Can someone explain why consumer surplus is 36 in this instance? Thanks!
Refer to Table below. If the price is four dollars but only six units are exchanged in the market, consumer surplus will be?
[Hint: Both the supply curve and the demand curve are linear]
Edit: Shouldn't the equation be (1/2)* 8 * 6 = $24?


texts: Value of companies with circular ownership

texts:
Given two companies, total assets of $100 million each.

Company 'A' owns \$50M of company 'B'.

Company 'B' owns \$50M of company 'A'.

If you look at the value of both companies do you get \$200M or \$100M in value?
Is there any effect of this in the stock market where there is lots of circular ownership?


texts: If automation implicitly increases wealth, why is it generally considered undesirable?

texts:
When it comes to the subject of automation, I read that the wide majority of the arguments assume that the profits/savings "vanish", alongside the jobs loss.

I see the reasoning above as flawed though: if automation lowers the prices of the goods (both by increasing productivity, and by reducing costs; I'm ignoring the automation industry itself) in general, this leads implicitly (in the long term) to an increase in wealth, and by extension (again, in the long term), to an increase of the jobs offer.

In practical terms, if producing, say cars, would cost less, people would save money and spend it through other markets, say going (more) to theater; the increase of demand in other markets would create new jobs, in this case, theater companies.

I see the net of all of this as positive. Am I missing some important factors?

I can see as argument (by some) that this phenomenon could/would only lead to increased profits for the "Top 1% of the evil capitalists©".
Although undesirable, this is irrelevant - such (evil©) people would certainly spend or reinvest the money, again, leading to the mentioned consequences.

It's important to note that I'm talking about long term. I'm sure that if literally tomorrow automation would take over millions of job, it would certainly be a disaster.
I'm also assuming a healthy economy, that is, the increase of savings/profits wouldn't stay still under the mattresses.


texts: Elasticity of substitution in Jehle and Reny Advanced Micro (3rd ed) exercise 3.8

texts:
Letting $f_i(\mathbf{x})=\partial f(\mathbf{x})/\partial x_i$, ($\mathbf{x}$ is a vector, a commodity bundle, and $x_i$ is a scalar, commodity $i$ in the bundle) show that,

$\sigma_{ij}(\mathbf{x})\equiv -\frac{x_if_i(\mathbf{x})+x_jf_j(\mathbf{x})}{f^2_j(\mathbf{x})f_{ii}(\mathbf{x})+2f_i(\mathbf{x})f_j(\mathbf{x})f_{ij}(\mathbf{x})+f_i^2(\mathbf{x})f_{jj}(\mathbf{x})}\frac{f_i(\mathbf{x})f_j(\mathbf{x})}{x_ix_j}$

Then using the above formula, show that $\sigma_{ij}(\mathbf{x})\geq0$ whenever $f$ is increasing and concave.

PS: I know $\sigma_{ij}$ can be written as

$\sigma_{ij}=-\frac{d (x_i/x_j)}{x_i/x_j} \frac{f_i(\mathbf{x})/f_j(\mathbf{x})}{d (f_i(\mathbf{x})/f_j(\mathbf{x}))}$

How can we derive the result from this known fact? Thank you.


texts: Can we have a Non-Reflexive Preference Relation?

texts:
I've been thinking about preferences alot recently and have been specifically thinking about the reflexivity requirement.

That is:
$$x \succsim x$$

Though this is apparent and obvious, I have been wondering why this is a required condition for rationality and if its possible to have a preference relation that is complete but non-reflexive.

Is it possible?


texts: Production choices in Hayek's theory of information-bearing prices

texts:
As I understand the work of Hayek, he asserts that prices encapsulate the true societal worth of the item being sold by integrating the compound need for all of the ingredients and work which go into that item.

I get the notion that he concludes (though I cannot cite him verbatim on this) that in order to facilitate the greatest societal benefit one should produce what is most expensive and consume what is least expensive (which a rational actor would do anyway, thus providing a more explicit mechanistic argument for Smith's "invisible hand" notion).

While I totally see this playing out in the middle and low price ranges, taken to the letter, this concept would be a directive to try and produce not high-tech, but luxury goods.

I can't see this being of the greatest benefit to society, since the price of luxury goods (e.g. higher-end Montblanc stationary) derives not from the materials, and only marginally from the craftsmanship, but primarily from the brand identity and the rigidity of the niche (by virtue of which it is possible to keep supply low).

I'm wondering if someone who understands Hayek better than I do could either explain to me why this is in fact the choice which would best benefit society, or why this conclusion does not in fact follow from Hayek's theory.


texts: Why is it possible to calibrate your subjective probabilities?

texts:
Humans tend to be overconfident in their predictions; when most people say that there's a 95% chance that something will happen, they're usually wrong far more than 5% of the time.  Whereas what ought to happen is that for all $x$, if a person makes a lot of predictions of the form "There is an $x\%$ chance that P will occur," then about $x\%$ of them should come true.  If a person's predictions does satisfy this property, then their subjective probabilities are said to be well-calibrated.

Now there may be no one who is perfectly well-calibrated, but some people are better than others; see the book "Superforecasting" for information on people who are extremely well-calibrated.  But calibration isn't something fixed from birth; you can train yourself to be better-calibrated by playing a game where you assign a probabilities to a bunch of things and then you're scored by how well-calibrated your subjective probabilities are (using e.g. the Brier score).  See this web site and this website.

But my question is, why is it possible to become well-calibrated using such a game?  Let $A$ be the set of possible events $f$ be a function from $A$ to $\mathbb R$ that gives a numerical assessment of how confident a person feels about a given event.  Then what playing the game is designed to do is to help you find an increasing function $g$ from $\mathbb R$ to $[0,1]$ such that $g \circ f$ is well-calibrated.

But in order for such a $g$ to exist, it needs to be the case that for all $x,y \in \mathbb R$, if $x>y$ then the percentage of outcomes in $\{P \in A: f(P) =x\}$ which are true needs to be greater than the percentage of outcomes in $\{P \in A: f(P) =y\}$ which are true.  In other words, it needs to already be true that you're right more often about statements that you're more confident in than statements you're less confident in.  But why should this be the case?  Are there any decision-theoretic assumptions or rationality axioms that imply this is the case?  Has it been empirically observed that humans are more often right about what they're more confident in?

It would certainly be a useful evolutionary skill if humans' internal confidence levels reflected external reality, but I've never heard of anyone discuss this before.


texts: How Do I Calculate the After-Tax Equilibrium Quantity of a Supply and Demand Graph?

texts:
Suppose the supply of a good is given by the equation $Q_S = 360*P_S - 720$. And the demand for a good is given by $Q_D = 960 - 120*P_D$. The government decides to levy a tax of \$2 per unit on the good, to be paid by the seller.

And I must find the equilibrium quantity of the curves, after the \$2 tax has been taken into account for. I know the equilibrium quantity is 540 before the tax based on the following calculations:

$Q_S=Q_D$
$360P-720 = 960-120P$
$480P = 1680$
$P = 3.5$
If we sub in 3.5 into both equations ($Q_S$ and $Q_D$) then we get 540.

Therefore, the equilibrium quantity is 540 before taxes have been taken into account. However, I am unsure how to figure out the equilibrium quantity after the tax.

Does anyone know how to go about solving this issue?

All help is appreciated.


texts: Differences between best response, dominant strategy and Nash equilibrium

texts:
I can't seem to get the differences of these terms.
I watched this video that has the differences of best response and Nash equilibrium:

But then I heard about dominant strategies from another video and searched for differences to land at this quiz question:

Is a player's best response in a game the same as his dominant strategy?
Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

Is there a table form that shows the differences of these 3 based on a specific player and what other players would do?


texts: Do the number of days in a month affect monthly return? (seasonality)

texts: When I see data like monthly return on news or tv, I always find the concept a bit strange, because obviously if you calculate monthly return for February and March, all things being equal, the monthly return of March would be slightly larger than February due to the fact March has more days than February. Is this the case in real life?


texts: What do people think are good economic policies to reduce informality?

texts: It seems that lots of informality, ie. people or firms that exist without being part of the tax, health, legal, regulatory systems, is one of the main issues to deal with in developing economies or poor parts of developed economies. Is there some sort of consensus on how to reduce informality?


texts: I learnt IS-LM model but I got curious whether it is applicable to the real world. I mean it's just an model, so I doubt that the realtionship between Y and r actually exists. Are there any real life examples that prove the model? I want to know if something like a recent world event or fiscal and monetary policies in sone countries actually affects output and interest rate.


texts:
I am a bit confused regarding the actual definition of structural unemployment. Some places say that it is the permanent decline of a particular industry, leading to workers being unemployed as they are occupationally immobile.

Other sources say that it is a change in the structure of an economy (e.g. from secondary to tertiary), usually brought about by changes in technology. (Also, just another question, how exactly does improved technology help convert an economy from being mainly secondary to being mainly tertiary?)

So, could you please provide a rock-solid definition of 'structural unemployment'?

Answers would be very much appreciated.


texts: Handling large percentage of zero-valued observations in the dependent variable in a panel dataset

texts: I am writing a paper using a panel dataset in which my depepent variable has an large percentage amount of zero values observations. Those zero values are real zeros, I mean they are not missing data or whatsoever. I have taken a look on the literature and there are many models that can be applied in this case. I am awared of the following: Tobit (Tobin, 1958), Two-Stage Model (Heckman, 1979), Two-Parts Model (Duan et al.,1984), PPML (Silva & Tenreyro, 2006) and Double-Hurdle models (Dong & Kaiser, 2008). Which one should I use and how to justify the adoption?


texts: Calculate power for multiple rounds of public goods experiment

texts:
I would like to calculate/simulate the a-priori necessary sample size for a repeated public goods experiment.

$N$ Participants play $R$  rounds of a public goods game  (linear, voluntary contribution mechanism, anonymous, no punishment, no communication, simultaneous decisions) in groups of $n$ (with $n \leq N$).

Let  private payout of a participant $i$ be $\pi_i$ calculated as $\pi_i = p_i + \alpha \times G$, with

$G=\sum_{i=1}^{n}(g_i)$

$p_i$ the contribution to the private account,

$g_i$ the contribution to the public account,

$ 0 < \alpha <1< \frac{\alpha}{n}$, which is the marginal per capita return (MPCR).

Each participant decides how much of their $E$ tokens she contributes to the public account, $0 \leq g_i \leq E$, whereas $p_i = E - g_i$.

Each round $r$ ($0 \leq r \leq R$) each individual $i$ starts with a new endowment $E$.

In the experiment, participants are randomly allocated to conditions. The conditions vary by two factors. Factor 1 has 2 levels, factor 2 has 2 levels, making this a 2x2 full factorial design. The levels are categorical.
Random allocation is between-subjects, i.e. each subject $i$ is allocated to the same combination of factor levels each round. In other words: Treatment allocation does not vary with round $r$.

I want to test for significance of the interaction between F1 and F2 on contributions to the public good $g_{ij}$. I am not quite clear on whether to use a random or fixed effects regression model for this, since the dependent variable varies with $r$ but the independent variables stay constant across rounds $r$.

Either way I would like to calculate, resp. simulate the power of the interaction effect, given n.
Since these types of experiments are frequently condcuted I wanted to ask whether someone could provide me with R or Stata Code for calculation or simulation, or any other type of resource.


texts: Will interest rates still hike even after a weak jobs report?

texts: Has this happened before in the past? A weak jobs report and a hesitant economy followed by a federal rate hike to control inflation? Thank you to all.


texts: Doesnt fractional reserve systems limit collapse of the money supply?

texts:
For example the black death occurred in basically a full reserve system. Because there was no m2 to destroy, the fall in output was inflationary. The same money existed chasing fewer goods.
Doesnt the same paradigm apply to fractional reserve? If the monetary base is around 10% of the supply then wouldn't a 90% collapse in output eventually become inflationary?
Money velocity is one way deflation could still happen. But even then arent there also fairly high floors to velocity, for example rental yields tend to increase in recessions therefore this would raise velocity anyway?


texts: Reference request on utilization of technology

texts: There are many studies on the rate of adoption and diffusion of technologies. Are there any papers (preferably empirical ones) on the utilization of technology? What I mean by "utilization" is whether a technology is employed to its fullest potential. For example, using a smart-phone to just make phone calls would be under-utilization, because many other features offered by the smart-phone are not utilized.


texts: Write search model as a signal density inducing posterior belief

texts:
Consider a decision maker (DM) who as to choose an action from the finite set $\mathcal{Y}$ with cardinality $L. $

The payoff the he gets depends on the action chosen and the state of the world. The state of the world is denoted by $z\equiv (z_1,...,z_L)\in \mathcal{Z}^L\subseteq \mathbb{R}^L$. The payoff when the DM chooses action $y\in \mathcal{Y}$ and the state of the world is $z\in \mathcal{Z}^L$ is denoted by $u(y,z_y)$.

Before choosing the DM does not observe the state of the world. His prior on $z$ is denoted by $F_Z\in \Delta(\mathcal{Z}^L)$ and has marginals that are equivalent across $y$.

Before choosing the DM can discover $z$ by searching sequentially and paying cost $c_y$  when uncovering $z_y$ for each $y\in \mathcal{Y}$.

When search stops, the DM chooses action  $y$ maximising his payoff among the searched actions.

Question

Can we find a conditional signal density $P_{T}(\cdot|z)\in \Delta(\mathcal{T})$ such that the problem above can be rewritten as
$$
\max_{y\in \mathcal{Y}}\sum_{z\in \mathcal{Z}} u(y,z_y) \underbrace{\frac{P_T(t|z) F_Z(z)}{\sum_{z\in \mathcal{Z}}P_T(t|z) F_Z(z)}}_{\text{Posterior belief by Bayes rule}}
$$
for each $t\in \mathcal{T}$?


texts: From an economics perspective, what are the ramifications of a currency with fixed money supply?

texts:
I'm thinking specifically of bitcoins.

What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies?  Would the currency have no inflation?


texts: Derivation question: Gali (2015), chapter 5, equation 25

texts:
I am wondering how Gali derived equation (25) in chapter 5 of his book Monetary Policy, Inflation, and the Business Cycle (2015).
We have equation (21):
$$
\vartheta \hat{x}_{t} = -\kappa \hat{p}_{t} + \Lambda
$$
and equation (23):
$$
\hat{p}_{t} = \delta\hat{p}_{t-1} + \frac{\delta}{1-\delta\beta\rho_u}u_{t} + \frac{\delta}{1-\delta\beta}\frac{\kappa\Lambda}{\vartheta}.
$$
Gali then combines (21) and (23) to get (25):
$$
\hat{x}_t = \delta\hat{x}_{t-1} - \frac{\kappa\delta}{\vartheta(1-\delta\beta\rho_u)}u_t.
$$
Now, unless I've made some kind of silly algebraic mistake, I'm not quite sure how he no longer has a constant term in (25). Or maybe I'm missing a simplifying assumption regarding some of the variables?
If someone can briefly explain this, it would be much appreciated.


texts: Imbens and Angrist (1994): the $D_i(z)$ variables

texts:
I'm referring to the Econometrica (1994) paper by Imbens and Angrist. In particular, I don't really understand the random variables $D_i(z)$ (defined on page 468). Could you please provide me with intuition about them and explain why, specifically, for $z\neq w$,
$$
D_i(z)-D_i(w)
$$
can only be either $1$ and $-1$? I understand that, in order to get $1$ or $-1$, the authors are looking at 2 scenarios $0-1$ and $1-0$. But why are the remaining scenarios $1-1$ and $0-0$ excluded?


texts: Algorithm to find Bayesian Nash Equilibria

texts:
I am working on a Bayesian game with a finite number of players and discrete types, but the complexity of the equations is not allowing me to find the BNEs by hand.

I read a paper describing algorithms to find approximate BNE in such games but could not understand how to implement it using code.

It would be a great help if someone could inform me about any program for the purpose, or help me with code if possible. Thank you!


texts: Disruption vs economic growth vs inflation

texts:
On the terms:

Disruption is when new players earn say 1m but take over of a 100m market segment, causing damage to well established but less innovative businesses
economic growth is what we read about growing markets and iverall economy
Inflation is when money gets less worth

Are all these three somehow interconnected, correlated or rather independent? Are there established works on that?

For example, could major diruption outpace economic growth and emphasize inflation?


texts: Do I need to log transform these two kinds of variables?

texts:
Before regression (like fixed-effects, random-effects), for these two kinds of variables:

1) Price levels (e.g. price level of capital formation)
They are usually ratios like 0.987, 1.022..., based on USA 2010=1

2) % of GDP (e.g. broad money as % of GDP)
They are also ratios (%) like 80.5, 99.7 (or in decimal form 0.805, 0.997)

Do I need to log transform them, and how can I log transform them?


texts: Book for Bretton Woods conferences and gold standard

texts: I am looking for a good book to explain to me why the gold standard existed and why in the Bretton Woods conferences, some countries choose to abandon it. An explanation of the general scenario in a historical setting would also be greatly appreciated.


texts: Why was activity analysis abanadoned as a field of research?

texts: Activity analysis was a thriving research area in the 1940's and 1950's. It was fruitful enough to earn the Nobel prize for Tjalling Koopmans. But it seems to have been abandoned altogether. Mas Colell, Whiston and Greene (1995), Microeconomic Theory, Oxford University Press, only devotes a seven page appendix to it and refer the interested reader to Gale (1960): The Theory of Linear Economic Models, McGraw-Hill. Based on this, my guess is that not much additional work has been done in the area since 1960 and I wonder why.


texts: Price setting for a pure exchange economy, with two goods and two agents, with possible different utility functions that depends on total consumption

texts:
Consider a pure exchange economy comprised of two agents with differentiable utility functions that are strictly increasing and strictly concave. There are only two goods in this economy (x,y) and each agent has a positive endowment of both goods. The utility functions are generic e possibly different, but both depend on total individual consumption x+y. Find the equilibrium prices.
My doubt, in this case, is if I can address the question by specifying different utility functions to both agents that depend on total consumption and satisfy the assumption (e.g. two different Cobb-Douglas)?
From that I could use the budgt set of both agents, from the initial endowmenst, to determine the quantities relative to the prices and the, from de $MRS(x_1, x_2)$ determine the prices suach as $\frac{p_1}{p_2}=MRS(x_1, x_2)$ and $MRS(x_1, x_2)=\frac{\frac{du(x_1,x_2}{dx_1}}{\frac{du(x_1,x_2}{dx_2}}$.
From that, I would get the relative prices as a function of the quantities, substitute one of these quantities on the budget set and get the prices relative to the initial endowments.
Is that sufficient to address the question posed?


texts:
My question regards how currency denominations might artificially affect prices. For example, a baseball game that determines a good pricing scheme for parking would be charging 7 dollars per person. But, due to the difficulty of exchanging change with everyone, may decide to instead charge 10 dollars for the convienence. I am wondering if there has been any research done in this area, and if anyone can point me in the right direction.

Specifically, I am looking at how cash denominations alter prices for convienence on the transaction.


texts: Where to find the face value in a US treasury bond announcement

texts: I am learning about the auction and bidding process of US 30 year treasury bonds. I am unable to locate the face (par) value of the bonds in official announcements (PDFs). For reference, here is a link to a recent 30-year bond announcement - PDF announcement, dated Feb 8, 2018


texts: How is the utility function with constant relative risk-aversion obtained?

texts:
In this slide, it says that constant relative risk-Aversion utility function have this form.

$u(x) = \frac{1}{1-b} x^{1-b}$ for $b≠1$

$u(x) = In(x)$ for $b=1$

When I tried to derive the utility function from $b = -x \frac{u''(x)}{u'(x)}$ (the representation of CRRA), I got $u(x) = x^{1-b}$.

While I understand that preference will not be changed by linear transformation of the utility function, I wonder why is it necessary to make the utility function be $u(x) = \frac{1}{1-b} x^{1-b}$ for $b≠1$.

Also how is the "$u(x) = In(x)$ for $b=1$" obtained?


texts: Why are European countries happy to be outside Eurozone?

texts:
In EU countries like Poland, Czech Republic, Hungary, etc, people are happy that they are not in Euro zone and Euro crises like that of Greece do not affect their economics.

However, some European currencies outside the Eurozone are pegged to a narrow band around the Euro, so their values largely change in line with the Euro's. So, what is the difference if we call a currency Euro or something else, when its value is changing by Euro crises?

For example, what is the advantage of currency in Czech over Slovakia now?


texts: Trouble understanding hamilton 1996 specification testing in MS

texts:
I'm an undergraduate student and I'm trying to code the specification testing for Markov-switching model in R, based on the article "Specification Testing in Markov-Switching time series models" Hamilton 1996.

More specifically, I don't understand equation 3.12, or maybe I have misunderstood something.

In equation 3.12 you have a term like this

$$ = p_{ij}^{-1} p(s_{t}=j,s_{t-1}=i|\Omega_{t})$$

But since

$$ p(s_{t}=j,s_{t-1}=i|\Omega_{t}) = p_{ij} p(s_{t-1}=i|\Omega_{t})$$

then

$$= p_{ij}^{-1}p_{ij} p(s_{t-1}=i|\Omega_{t}) = p(s_{t-1}=i|\Omega_{t})$$

Is this ok?


texts: Quantity supplied & demanded equation with tax

texts:
Here's the simple question I can't get my head around :(

QD= 120-P
QS= 2P-10
Tax= 25 euro per unit

How much does the government receive?


texts:
In 2011, household, financial, and business debts stood at 420% of GDP in the UK.

This doesn't sound like a very good state of affairs (am I wrong?).

If this is a negative state of affairs how did the UK arrive at such a position? Presumably someone in a position of governance monitors the macroeconomic state at all times.

If so, why was corrective action not taken at 200% (or whatever)?


texts: Why should the cost of home ownership and home renting be equal in the long run?

texts:
According to the person in this video (at about 10:10) from the economist, the evidence shows that long run cost of owning and renting homes are approximately same.

The video itself tries to explain it in the minute before that person speaks about the evidence showing this, but I dont understand the explanation.

The video says that this is because home buyers have to make mortgage payments which include interest and maintenance costs such as insurance, repairs and so on.

But I still don't understand their explanation because when people rent they have to make rent payments forever and they never get the house. However, when people buy house they have to make mortgage payements maybe for 30-40 years and after that the home is theirs and now they only need to make the upkeep cost which I always thought are small (but I am not a home owner so I dont know that for sure). So how come the evidence shows that they are roughly equal? Or is the video incorrect?


texts: Why exchange rates of national currency are usually stable, where as cryptocurrency like bitcoin and ethereum is highly volatile?

texts: Exchange rate of national currency like US dollar or INR don't fluctuate much during a month or year, but the exchange rate of cryptocurrency like bitcoin is highly volatile even in a single day. What are the variables that impact the volatility of a currency? How does the government maintain the stability of its currency? Can one have a stable coin mathematically for example by changing the count of currency? How exchange rates of cryptocurrency and other currencies are calculated, who calculates it, what is math behind it?


texts: What type of econometrics is practised most?

texts:
This might sound like a weird question, but what type of econometrics is most common in academia and / or the private sector?
Here I am thinking about time series econometrics (Bayesian and Frequentist) on one side, vs what I would call Microeconometrics (not necessarily tied to only microeconomic issues) - i.e. quasi experimental methods and establishing causality - on the other. (Maybe this is the wrong way of drawing a line or there should be more lines drawn between different areas in econometrics. Than I am happy to adjust my question.)
I have been at 2 unis now where people claimed that there is literally no research with time series stuff going on. At the same time, the place where I did my undergrad seemed to have focused especially on Time series stuff (at least my teachers did). On the other hand, I would guess that most private sector jobs (and central banks) would want someone that does forecasts and other time series methods.
Does anyone have a few wise words on the demand for econometric methods and what type is more common where? I guess there is no clear answer for all of the world, but is there some countries / regions for which one can answer this question? Also can this question be answered for big agencies like the world bank, the IMF, the ECB or the OECD?


texts: The Next Breakthrough of Growth Economics

texts:
Romer has once said, that the growth economics has not had a breakthrough after his work of endogenous model of 1990's. What could somehow prove his saying is that we rarely see the theoretical invention in growth economics area in the recent years but large quantity of empirical study, with a portion of which is just going through the similar old way of the empirical works of 1990's.

My question is, where is the research of growth economics heading to ? What could be the next breakthrough specifically in this area ?


texts: Federal Reserve OMO money goes to the Treasury?

texts: If Federal Reserve performs open market operation by selling government securities then Fed gets money, who keeps that money? Does it go to Federal Reserve Deposit or the department of Treasury or somewhere else?


texts: This is more of an informal question. I am studying microeconomics theory and have completed the intermediate microeconomics by Hal R.Varian. I really enjoyed the book and want to upgrade my skills. So please suggest me some good books that would serve the purpose. Thanks.


texts:
I have the following unrestricted model $y_i=\beta_1+\beta_2x_{2i}+\beta_3x_{3i}+u$ and the restriction $\beta_2+\beta_3=1$ I need to give an equivalent unrestricted model such that if one of its parameters is equal to zero, then the restriction applies.

I had in mind $y_i=(1-\beta_3-\beta_2)+\beta_2x_{2i}+\beta_3x_{3i}+u$ but of course it is incorrect.


texts: Conventional Monetary Policy and Income Inequality

texts:
In almost every textbook, it's stated that monetary policy is preferred to fiscal policy, since the latter is more politically difficult to implement due to smaller consensus on its redistributive effects. Monetary policy would not suffer, since it has no redistribution effect.

Has any empirical study ever tried to verify/assess this claim that Monetary Policy has not redistribution effect?


texts:
I am wondering if I have found q for all 3 firms correctly before I move on. I feel like I am doing something completely wrong, but can't seem to figure out what I truly need to do. (Sorry for the many pictures, I don't know another way to get post all of the information without doing it this way) Here is the question:

Here is my work leading up to the answers I got for each q:


texts: Short-run and Long-run cost against the price of the variable input

texts: This is an image of page 133 of Microeconomics; Gravell and Rees.In the fourth line there is a statement about the slope of those curves. Can anyone please explain me the reason??


texts: What's the minimum number of datapoints in order to run a diff-in-diff?

texts:
I was thinking about running a diff-in-diff with fixed effect in order to deal with a panel data experiment. The problem is that I don't know how many datapoints I need in order to the experiment be reliable.
This is the thing: I want to see how my customers react to a change in price. An AB test doesn't look like a good alternative, due to cannibalization. So I would like to change the price of a bundle of products in some cities. Let's say for cities A, B, C and D, cleaning products will be 10% cheaper. Then I would run a diff-in-diff with fixed effects using each city datapoint. The question is: how many cities do I need in order to run this experiment? How many sales each city would have to have in order to the experiment be reliable?


texts:
Suppose,
the Aggregate supply is given by the Lucas Supply Curve -
$y_t = ȳ + b(P_t - E_{t-1}P_t) + μ_t$
where $μ_t$ is stochastic supply shock (following standard normal error properties).
Aggregate demand equation is given by -
$y_t = m_t - P_t + v_t$
where $v_t$ is stochastic demand shock (following standard normal error properties).
Monetary authorities follows the policy rule -
$m_t = \bar{m} + m_{t-1} - cy_{t-1} + dμ_t +fv_{t-1}$
For the system, after solving for $y_t$ under the assumption of rational expectations (ie. Agents incorporate monetary policy changes into their decisions), I get it as a function of demand and supply shock.
$y_t$ = $b/(1+b) v_t$ + $(1+bd)/(1+b) μ_t$
Here, though $y_t$ is a function of policy parameter 'd' but $μ_t$, being supply shock of the current period equally random to both public and monetary authorities, is unanticipated part of money supply.
PIP argues that any anticipated changes in money supply cannot affect real variables. Since, $μ_t$ is unanticipated so by this regard PIP must hold. But since the policy parameter 'd' enters the output decision so monetary policy do have some influence over real variable. Then does it mean PIP doesn't hold.
I am confused between the two arguments. It will be helpful if someone can explain which one of the two is right? (Whether PIP holds or not and why?)


texts: What are good advanced textbooks to learn mathematics for economist?

texts: I am looking for books or other sources that focus on math that is above bachelor level (i.e. above just simple calculus). I am not looking for a specialized text for some field but just general mathematics at graduate level covering wide range of topic. My current math skills are very shaky after some simple univariate/multivariate calculus. If instead of textbook you know of good MOOC course that you could recommend it would help me as well. Thank you!


texts: I want to ask a question about mathematical economics. When I read an article about economics, I see lots of mathematical equations. I can solve them without any help. But I can't create my own mathematical equations. For example, this guy created his own equation. How can I learn this skill? I know how to solve some advanced equations like differential equations. But I want to create my own problems' equations. Please give me some advice.


texts: Is charging of interest inherently rent seeking?

texts:
Is the real interest rate component of interest (excluding default risk premium, etc) inherently rent seeking?

The real interest rate is typically considered to repay the opportunity cost of lending money, however, note that there is some degree of circularity in this definition: if charging of interest were prohibited on grounds of being rent-seeking, then the opportunity cost of lending would be less. So the question remains.


texts: Do Chinese tariffs on American goods make them more expensive to American consumers?

texts:
This CNN article seems to imply that Chinese tariffs on American goods will make them more expensive to American consumers. Is this true? I did think that tariffs by your own country on imported foreign goods made those imported goods more expensive, but I also thought tariffs by a foreign country on goods your country exports actually made those goods cheaper for you.

Example statement in the article:

  The cost of the new tariffs can be found in the roughly 1,300 individual products that have suddenly become more expensive.

This statement is followed by a list of "US goods hit by Chinese tariffs
". Clearly the implication is these goods are among the products that have become more expensive.


texts: Open market purchase of securities and it's effect on balancesheet

texts:
An open market purchase of securities lead to increase in bank reserves ( Liability side) and increase in assets(asset side) of central bank balance sheet.
My doubt is why it leads to increase in Reserves?


texts: Game Theory (continuous strategies, pure strategy)

texts:
So I have this Game Theory problem, and I have a solution, but at a certain point I assume the symmetry of the problem to finally get my answer.  I'd like to be able to avoid using symmetry, though, so that in the future I can solve problems that are not symmetric.

So Alice and Beatrice are suppliers, Ashok and Bob buy from them to then sell again at retail.  Ashok only buys from Alice and Bob only buys from Beatrice.  First Alice and Beatrice set their prices simultaneously, $p_{A},p_{B}$ respectively.  Then Ashok and Bob set their quantities $q_{A},q_{B}$, and their price is determined by

$$P=1-q_{A}-q_{B}$$

The payoffs for Alice, Beatrice, Ashok, and Bob respectively are $p_{A}q_{A}, p_{B},q_{B}, q_{A}(P-p_{A}), q_{B}(P-p_{B})$.  I want to find a sub-game perfect equilibrium.

I first look at Ashok and Bob and, for any fixed prices from Alice and Beatrice, find the intersection of their best response curves.

$$\frac{dB_{A}}{dq_{A}} = 1-2q_{A}-q_{B}-p_{A}=0$$

$$\frac{dB_{B}}{dq_{B}} = 1-q_{A}-2q_{B}-p_{B}=0$$

We're solving for $q_{A},q_{B}$ so we get

$$1-3q_{A}-2p_{A}+p_{B}=0 \Rightarrow$$

$$q_{A}=-\frac{1-2p_{A}+p_{B}}{3}$$

Similarly for $q_{B}$.  Once we know those, we can substitute into the first equation for price and solve for $p_{A},p_{B}$.  But the solution will not be unique.  It becomes unique when I assume $p_{A}=p_{B}$ but if anyone can point out how I can solve this without that equation, I'd appreciate it.


texts:
I have been searching around online, but cannot really find an answer to my question.

I can find a lot of material covering wealth inequality and how it has developed over time, but haven’t found any material to support my theory (or the opposite).

My question is: Is wealth inequality actually a problem? With this I mean the super wealthy vs the rest (if that makes a difference).

I will try to explain my thinking as good as possible. My theory is, that super wealthy people tend to not spend all of their money, they may invest it or set it aside.

Consider a scenario where an individual owns 99% of all the wealth (i.e. money, disregard stocks, bonds etc in this scenario) in an economy, but spends roughly the same as everyone else in the same economy, effectively “disabling” a huge portion of the wealth. Would the “poor” actually be affected by this negatively? Would prices on goods reflect that “effective” wealth, or the total wealth in said economy?

Another scenario could be where one person owns most or all shares in all companies in the economy, and everyone else living of of salary. Would this actually be a problem? I imagine that it is same as above scenario.

Obviously these are silly extreme scenarios, I was just trying to paint a bit clearer picture of where I am coming from.

If the super rich (or perhaps top 1%) have an average spending similar to everyone else in an economy, with the only difference that they own more wealth, would that actually be a problem; or perhaps in reality a smaller problem than how it is depicted in the media?

I am not looking for political standpoints, but a more fact based answer.