texts:
There is this concept of free cash flow.
Now, I have heard is the amount of money left after you reduce from the net income all other expenses that relate to labor and investment and so on.

That is the money that you can use freely, and it is a fortune you have gained.  If so, then why if a company has extra X in cashflow, its stock price doesn't grow as $\frac{X}{shares}$? Have you gained ideas too?
and if you haven't?

In fact, the difference in price is closer to 20 or 30 times.

It is however used in the calculation of intrinsic price.
So, I'd like to know how this magic is made.

Do you simply assume price/FCF is constant? Is it better than assuming PE is constant?

How can you roughly estimate how a company is worth given its FCF (and DCF)? and why is this factor of 20-30?


texts: What is the need for a special purpose entity/vehicle in mortgage backed securities

texts:
What is the need to create a special purpose entity/vehicle (SPV) for mortgage backed securities? What potential risks are avoided due to the creation of SPV?

It is my naive idea that the holder of the security always has the first priority right for receiving repayment and interest on the loans. How is this affected in the scenario where the bank transfers the assets to an investment bank vs the SPV transfers the assets to an investment bank, which in turn is securitized?


texts: Regression of first differenced log-transformed model

texts: I am cosidering to transform a regression equation applying logarithms to the dependent and some of the independent variables (the ones I am actually interested in while leaving unchanged the others that I would like to use just as controls). This in order to interpret the coefficients of the transformed variables, say b, as "1% change in explanatory variable induces b% change in the dependent variable". Then I am thinking to first-differencing transform the model, that is, to introduce for both dependent and independent variables (again just the ones log-transformed of interest) the first lagged values (the values in the previous period) and the taking the differences between current and previous values as variables of the regression to be estimated. Wuold there be any issue in following this procedure?


texts: Why is inflation rate so low in euro zone?

texts:
Inflation rate for Eurozone in December 2015 was 0.2%. In November 2015 it was 0.1%. Meanwhile ECBs target is annual 2% and it seems that ECB does everything it can to push the inflation to the target. For example:

  The ECB in December decided to lower the deposit rate by 10 basis
  points to -0.30% and extended the asset purchase programme until March
  2017 or "beyond if necessary". Yahoo! Finance

ECB probably wants to stimulate economic growth by causing inflation (?), but the question is what makes it fail? Greece is printing billions of euros, interest rates are lower than low, euro itself has devaluated dramatically. Why is that inflation still doesn't happen?


texts:
I assume that it makes sense to ask for the energy costs of transportation of different goods per weight and volumetric mass density, depending on the means of transportation (truck, train, ship, etc.) and on the distance of transportation.

I assume that there are either data or plots for this, but I don't know where to find them. A typical plot I'm looking for would answer the question:

  How much energy (including losses) does it take to transport one
  metric ton of good X (having volumetric mass density $d$) by train for
  100 resp. 1000 miles, today and 100 years ago?

In case you don't find this question (or approach) sensible, please tell me why.

Background: I'm planning a data visualization project of transportation of all kinds of goods. One part of the project will be the routes of transportation: along which paths and for what distances are which volumes of goods transported? (On a global and a local level.) Another part shall be the costs of transportation (to which finally will also count the costs of lifting goods, e.g. in a harbour, but maybe these are negligible).


texts: Let’s say we have a certain DGP $y=c+ax+bz+ error$. I take this to mean that conditional on the values of $x$ and $z$ in a certain instance (and no additional information )the expected value of $y$ can be inferred by plugging the values into the above equation. Now let’s say $x$ and $z$ are correlated. A different DGP may now be $y=d+mx+error$ where m may be higher(or lower) than $a$ due to the correlation of $x$ and $z$. Now wouldn’t $y=d+mx+error$ also be a valid DGP given that the expected value of $y$ conditional on $x$ (and no other information) is given correctly?


texts: Renewal of multiple notions of value in contemporary (green, public good) economy and are there general game theories?

texts:
https://en.wikipedia.org/wiki/Exchange_value mentions 4 notions of value: economic value, exchange value, use value, price. But this article also mentions that these are Marxian concepts and the contemporary economy do not make distinction among those values and the notion of the market price is sufficient to explain the value of the good of service.

Actually I would like to follow the path of contemporary orthodox economic theory, not heterodox theory. But I feel that there can be cases, where goods can have value that is different from the market price and it would be worth to capture and determine those other values:

value of energy unit produced by different technologies (oil or green). One can argue that the same unit of energy that is sold by the same market price have different societal value because of some environment harm
culture goods: they are not usually appropriately priced by the society, e.g. many countries have subsidies for the concerts of contemporary classical music or for the culture periodicals
scientific discovery service: scientific discovery usually is not priced accordingly - wages for the scientists are small but the impact of their discoveries can be enormous.

So - some valuation always happen in government subsidies etc. Are there valuation theories (orthodox, conventional, non-Marxian) that try to capture this valuation process (e.g. for green economy, for cultural goods, for science investments) in some common terms? Are there game theories that try to determine the multiple types of value for some item?

My question is very important - computer science and artificial intelligence consider reinforcement learning as the most promising approach for the emergence of intelligence. Such learning process requires reward function. One can argue that the simple market price is the best reward function. But - if governments have some subsidy process, some support process for some parts of economy then the value theory and valuation games are very important for the determination of the reward function that is used for the training artificial general intelligence?


texts:
In standard microeconomics textbooks they usually assume that the cost curve consists of just two variables which are Capital and Labor ( I'm talking about this equation: TC = rK + wL)
So when we derive the marginal cost curve from the equation above and eventually get MC = w/MPL , the textbook I'm reading stated that when the price of labor (w) rises, the MC curve and AVC curve will shift upwards. I have two questions regarding this:

When the price of labor w rises, does the MC curve shift upwards without any change to its shape at all? Because when we assume that Labor (L) is a cubic function of Quantity (Q) (which means that the Total Variable Cost curve "TVC = wL" will also be a cubic function), with the MC and AVC curve being a quadratic function, when w rises in "wL" the shape of MC will definitely change because the constant number "w" attached as the leading coefficient to the MC curve equation will rise. So I want to ask if my logic is right and if the the shape of the MC curve will change while shifting upwards (To be more exact, I want to know if when "w" rises, the U-shaped MC curve will be folded more towards the middle mathematically, as I expressed above. For instance, f y=x^2 becomes y=2x^2, the U-shape will be folded more inwards. That's what I'm asking about above).

What happens if other Variable Costs besides the price of Labor shifts? I know that only "w" is included in the TVC model for simplicity, so I'm curious how we apply the changes to other Variable Costs (such as the price of raw materials) to the MC curve. If the price of raw materials rises, will the MC curve shift upwards? If so, does it shift upwards while changing the shape of the MC curve, like the first question above? I wish to know how this is mathematically applied to the original MC curve equation which only has "w" as the Variable Cost variable and nothing else.


texts: Separate optimization problem versus one big Lagrangean

texts:
I am a bit confused about when to consider a separate optimization problem and when to combine different problems into a single optimization problem.

Consider an individual who derives utility from consumption:$$\sum_{t=1}^{T}\beta^{t}u(c_{t})$$
  and is given a stochastic endowment of money every period, that is $y_{t}$
 . Now, if there are no savings, I understand given that $u'>0$

that optimality dictates that $c_{t}=y_{t}$
 . If there were savings, however, we would write down a Lagrangean, and use FONCs to get Euler equations. My question is as follows: when can optimize for each period separately? Will it be when the periods are linked in some way? If the arguments we wish to maximize over are independent of each other (across periods), can we consider separate maximization problems?


texts:
As the title states, I want to know how to derive the hicksian demand of perfect complements $\text{min} \, \{x1,x2\}$.  Thanks in advance.

Also, no price is given, or budget.  my main question is how do i do this considering there really is no utility function?


texts:
Why is the financial trading sector exempted from consumption taxes?
For example, shares seem to be exempt from GST in both Australia and Canada. What is the intention behind this? Is it common for jurisdictions to have a VAT or sales tax that also covers or excludes financial instruments and supplies?
Semantics aside, is there something that would make it infeasible for some kind of sales tax to be levied at an identical rate on every transaction in the economy?


texts: Is fiat currency better than a backed-currency?

texts:
My question is would it be better if we went back to something like a gold standard but backed by a finite virtual material instead? It avoids the problem of fluctuations in gold supply. The money-supply is also fixed, so governments can't devalue currency with respect to the commodity, and cannot make more of it. If the economy grows, each unit of currency has more purchasing power, but you cannot print more money. Would this stop overprinting of money, help prevent hyperinflation?

My knowledge of economics is very poor so apologies in advance.
(Sorry I have edited this question so it makes more sense)


texts: Terminology for "part" of extensive form game

texts:
How should I call a "part" of an extensive form game which is neither (i) a subgame, nor (ii) a stage in a repeated game?

For instance, consider the class of games constructed by "stacking" 2 Stackelberg games, but where the identity of the player who choses first in the second part may depend on the actions in the first part.

I believe these kinds of games are not strictly speaking repeated games (right?).
If that's correct, I cannot really speak of the first "part" of the game as the first "stage" (or can I?).

Do you know of any standard terminology to talk about such "parts" of games which are not strictly speaking stages of repeated games?

Edit: if you can substantiate your answer with examples of papers where the terminology you propose is used, that would be even better.


texts: What is the equilibrium price in this case?

texts:
From the Review Questions to Chapter 1: The Market in Hal Varian's Intermediate Microeconomics with Calculus, 9th ed.:

Suppose that there are 25 people who had a reservation price of $\\\$500$, and the 26th person had a reservation price of $\\\$200$. What would the demand curve look like?
In the above example, what would be the equilibrium price if there were 24 apartments to rent? What if there were 26 apartments to rent? What if there were 25 apartments to rent?

Please note that in this chapter, the supply of apartments is taken to be fixed.
I have drawn the demand curve, and attempted to solve the first two cases in the second question in the following way:
If there are 24 apartments, they go to the 24 people with the highest reservation price. This happens to be $\\\$500$, so that is the equilibrium price in this case.
When there are 26 apartments, we can imagine 25 landlords successfully leasing their property for $\\\$500$, and one landlord who is unable to net the $\\\$500$ lowering his price until he reaches $\\\$200$. This prompts a surge of potential tenants at his doorstep, but the apartment does not necessarily go to the tenant who had a reservation of price of $\\\$200$; it goes to whomever spends most time bargaining with the landlord, has the best connections, etc. Since this apartment generally goes to someone who had a reservation price of $\\\$500$, the new tenant vacates an apartment in her wake, which is then leased for $\\\$200$, and so on until everybody is living in a $\\\$200$ apartment.
The third case is confusing. The answer at the end of the book says that the equilibrium price would be "any price between $\\\$200$ and $\\\$500$" when there are 25 apartments. Why is this true? It seems to me that since the supply of apartments is fixed, the price of one apartment would depend only on the reservation price of tenants. If the equilibrium price is anything lower than $\\\$500$, landlords would have an incentive to arbitrarily increase the rent to the highest the market can absorb, i.e., $\\\$500$. What's keeping the equilibrium price below $\\\$500$?
Please also tell me if my reasoning about the other two cases is flawed, or there are other, better ways to reason about them.


texts:
I'm currently studying economics and am interested in getting into economic research. I'm aware of how math based economics research is. I have done some 1st math courses (probability, linear algebra, univariate calculus and discrete math), a 2nd year course in probability and have done/am going to do multiple courses in econometrics. However, I would like to learn the remaining math needed in my own time. When looking at advice pages on this topic people usually say some combination of needing: linear algebra, multivariable calculus, real analysis and probability. However, I'm hesitant to learn all of these topics from text books as I feel like I would learn a large number of topics that aren't used in economics. For example, in multivariable calculus divergence doesn't seem that applicable to economics. I feel that my time could be spend more productively going deep in the concepts that come up a lot in economics. I was wondering whether someone would be able to collate a list of all the useful concepts needed in each of these subjects in the format:
Multivariable calculus:

Langrangian
Hessian matrix
etc

Thanks in advance.


texts: Concavity of Cobb-Douglass Utility Function on Non-Open set

texts:
My textbook argues that the Cobb-Douglass utility function $u=(x1)^a(x2)^b$ with $a,b>0$ and $a+b<1$ is concave on $R2+$ by computing the Hessian and showing it to be negative semidefinite for all points in $R2+$.

However, I feel this method is flawed because $R2+$ is not an open set. A function is  concave on the set $A$ if and only if its Hessian is negative semidefinite for all $x$ in $A$, but the assumption is that $A$ is an open and convex set. This does not hold, so the above methodology seems flawed. I am getting confused about this, so I would really appreciate some help please!

For reference, the textbook I am using is this: https://mjo.osborne.economics.utoronto.ca/index.php/tutorial/index/1/cvn/t


texts: Intrinsic value of non-voting shares which don't pay dividends

texts:
What is the intrinsic value of a company's non-voting stock shares which don't pay dividends?

My understanding is stock ownership has value in the form of controlling the company or receiving a portion of the profits.  Where does value derive from when neither of these is present?


texts:
What is Owner occupied public housing?
This text says "in Singapore at present about 86 per cent of the population live in public housing, of whom 90 per cent are home-owners."
https://www.jstor.org/stable/43196729?seq=1
How can you be the owner of you live in an apartment owned by the state?
Maybe the government sells the apartments to the people living in it, if they chose so?


texts: please help describe a) what exactly is the Paradox of Profits , b) what is the argument of these papers exactly

texts:
here are 3 papers that discuss it.
it seems to me that the paradox is that, supposing a closed economy has money M raised through bank loans, then, while that economy can create goods and services and thus can grow in real terms, (ie there are aggregate real profits) it seems that there cannot be any aggregate monetary (nominal) profits since the amount (stock) of money in the economy does not change.

Marx says that under a closed economy under the gold standard , money supply can grow only via finding new gold in gold-mines , and it is ridiculous to think that profits will be equal to the gold found.

It relates to the income/expenditure/output identity of National Income Accounts / NIPA which says that income = expenditure , therefore profits = 0

https://keenomics.s3.amazonaws.com/debtdeflation_media/papers/9780230_203372_10_cha09.pdf

http://www.economics-ejournal.org/economics/journalarticles/2010-31/version_1/at_download/file?fbclid=IwAR0Le51-

http://www.economics-ejournal.org/economics/discussionpapers/2009-52/file


texts:
I'm studying for an economics exam and am stuck on this question:

If consumers in Vietnam increase their demand for products that are manufactured in Mexico, which of the following will occur?

A. The supply of Vietnamese dong will decrease.

B. The Vietnamese dong will appreciate.

C. Mexico's financial capital inflow will increase.

D. The Mexican peso will depreciate.

E. Vietnam's financial capital inflow will increase.

The answer is E. Can somebody explain? From my understanding, since Vietnamese dong are going to Mexico to buy those manufactured products, there would be net capital outflow from Vietnam, not inflow. Thank you!


texts:
What are the perfect Bayesian equilibria in the following game?

The part that is confusing me is the right-hand side, where player 2 is of type N.

Thanks!

EDIT: My workings out so far are given below:

We start off by noticing that if player 2 is type $N$, it can be rational for him to play both $Steal$ and $Split$, as he does not know what player 1 plays.

Let us therefore first look at the case where player 2 plays $Steal$ if he is type $N$. Then player 1's expected payoff from stealing is $100\beta$ and his expected payoff from splitting is $50\alpha + 50\beta$. In this case player 1 steals when $100\beta > 50\alpha + 50\beta \Leftrightarrow \alpha < \beta$, and therefore splits if $\alpha > \beta$ and is indifferent when $\alpha = \beta$. This means we get the following potential PBE's in this case:
\begin{align*}
    (Steal, Steal; \alpha \leq \beta) \text{ and } (Split, Steal; \alpha \geq \beta).
\end{align*}

Let us next look at the case where player 2 plays $Split$ if he is type $N$. Then player 1's expected payoff from stealing is $100\beta + 100(1-\alpha-\beta)=100(1-\alpha)$ and his expected payoff from splitting is $50$. In this case player 1 steals when $100(1-\alpha) > 50 \Leftrightarrow \alpha < 1/2$, and therefore splits if $\alpha > 1/2$ and is indifferent if $\alpha = 1/2$. This means that we get the following potential PBE's in this case:
\begin{align*}
    (Steal, Split; \alpha \leq 1/2) \text{ and } (Split, Split; \alpha \geq 1/2).
\end{align*}

As such, we have can write up the set of pure-strategy PBE:
\begin{alignat*}{1}
    \text{PBE} = \{&(Steal, Steal; \alpha \leq \beta),(Split, Steal; \alpha \geq \beta), \\ &(Steal, Split; \alpha \leq 1/2),(Split, Split; \alpha \geq 1/2)\}.
\end{alignat*}


texts: Differences between LATE and Heckman Selection

texts: I have heard that a paper by Heckman and Vytlacil demonstrate comparisons between nonparametric Heckman selection (NP Heckit) and the LATE (local average treatment effect) framework. Could someone clarify the differences and similarities between LATE and Heckman selection?


texts: What was Paulus's "famous definition of price"?

texts:
Schumpeter (1912 [1954]) mentions

  the famous definition of price by Paulus.

What does this refer to?


texts: Why would a common currency such as the Euro that can't be devalued be incentive for banks to lend money to a country?

texts:
I'm reading an article that is claiming that when the Euro was created, banks began lending more money to countries than before because as the Euro is a common currency across many countries one country can't devalue it. According to this article,

  If you take 10 million Deutsche Marks from Frankfurt and you give it to a Spanish, Greek or Italian firm or bank - and that is prior to monetary union - and then suddenly there is a substantial devaluation of the currency of Spain, of Italy or Greece - something that was happening at regular intervals prior to monetary union - then you know that the capacity of the creditors to repay the loan shrinks. Because their income comes int he local currency, they will not be able to repay when the local currency is devalued.

Why does this matter? If a country was using the Euro, wouldn't they be getting(ignoring increase/decrease in exports and imports due to the devaluation) roughly the same amount of money but in Euros instead of the local currency? I would appreciate clarification on how and why this devaluation is different in terms of repayment.

EDIT: For context, the source I'm reading is as follows: Varoufakis, Yanis. "CREDITORS UNINTERESTED IN GETTING THEIR MONEY BACK: DISSOLVING THE EUROZONE PARADOX." The Journal of Australian Political Economy, no. 77 (2016): 23-36.


texts: What's the difference (if any) between "fixed assets" and "fixed capital" in the UN SNA?

texts:
From my reading of the UN System of National Accounts (2008 update), "fixed assets" and "fixed capital" seem to be completely synonymous. Yet strangely there seem to be these two different terms. So what, if any, is the difference between them?

I can find a definition for "fixed assets" but not for "fixed capital":

  Fixed assets are produced assets that are used repeatedly or continuously in production processes for more than one year (p. 196).

I can also find a definition for "consumption of fixed capital":

  Consumption of fixed capital is the decline, during the course of the accounting period, in the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration, normal obsolescence or normal accidental damage (p. 198).

Elsewhere, I find a statement which, together with the above, would seem to identify "fixed assets" with "fixed capital":

  consumption of fixed capital, a figure representing the decline in value
  during the period of the fixed capital used in a production process. (p. 3)


texts: How exactly does the black market affect a country's economy?

texts:
Disclaimer: I'm far from an expert on economics. I apologize if the question seems poorly asked or not clear.

Take for example the drug trafficking business and cartels in the past. It seems to me that the production cost of illegal drug substances was quite low. Most of the usual substances back then were either a form of plant or extracted from certain kinds of plants.

In contrast, the demand of those substances was tremendous, mostly because of their unusual properties and effects on the human body.

How this low production cost - enormously high demand combo affected the economy of the countries where drug trafficking was taking place?


texts: Due to rising costs of college tuition, is it likely that the future will have less universities and the remaining only for those of much wealth?

texts:
I am very sorry if this is worded wrong.  I've looked at the numbers myself and it astounding how much college has gone up in price even for commuters in a few decades.  People didn't need these massive loans in the 60's or 70's.  I am graduating in a year with a degree in Online Journalism and Media and spend over a grand a semester out of pocket AFTER loans and aid.

Many people think people like me are lazy because we need help to afford college.  I have seen articles of people who work 70 hours in the summer and full time during school during full time classes; but that a lot.  Some may not be able to handle that kind of stress especially if the major was like software engineering or IT Business.

Given this, are they right in what they AND by the numbers and how America has handled things, is college likely to be non-existent or for upper class people and rich in the future likely?

OK!!  I am very sorry it got opinionated and personal in paragraph 2.  I'm a worry wart who is here to learn about economics in what concerns me.  Please just answer the big top question.


texts: IS-LM - Effect of interest rate on price level

texts:
I'm starting to study the Keynesian theory, and I have just read that the increase of interest rate ($r$) will lower the price level ($P$). I tried to understand this using the IS-LM model (I mean, visually through the curves or through the equations), but I am stuck at this reasoning.

If I consider the LM curve and its idea, we will eventually see the following curve:

This represents the interest rate in the y-axis and real money in the x-axis. Now, if I want to know the effect of an increase in $r$ (from $r_1$ to $r_2$), I can say that the real money will be lower, and considering $M$ constant, this implies that $P$ increases. I am aware that this result is obviously not correct, how could I understand this change in $r$ in terms of the IS-LM curves correctly?


texts:
In a New Keynesian model, under the assumption of sticky prices, we need to express the monetary policy through an equation in order to close the model made of New-Keynesian Phillips curve and dynamic IS curve.

I've read that an easy choice is to use the so called Taylor rule, which express the interest rate as a function of inflation (and possibly a random component). But, I've read that it is a suboptimal choice because it is something exogenous, whereas if we endogenously compute the optimal monetary policy we can reach a better result.

My question is why using a Taylor rule when we know it is not optimal to do that?


texts: Is there a good mechanism to incentivize leveraged firms to take less risks?

texts:
It seems that there are some circumstances, say when the government foresees a financial crisis, where it would like firms to hedge, take less riesk etc. However, leveraged agents benefit from risk, and so they don;t benefit from risk eduction expenses.

Is there some theory or idea, out ther eon how to design a mechanism that incetivizes firms to reduce their riskiness? Maybe subsidize financial hedging? Maybe tax profits very progressively/convexly?


texts:
According to Merriam-Webster's dictionary, capitalism is "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

One could argue that banks are the engine which drive capitalism in today's world, since they are the institution which actually creates money through the lending of money at a rate of interest. However, there is nothing in the above definition of capitalism which indicates that banks are necessary for capitalism to thrive.

My question is what would happen if every country in the world were to make a law that would make it illegal to lend money at a positive rate of interest? Then of course, traditional banks would cease to exist. But would capitalism also cease to thrive? In other words, would people lose their incentive or ability to produce?


texts: Why is the ten year interest rate lower for Spain/UK bonds than for US?

texts:
Take a look at the government bonds interest rates, https://www.marketwatch.com/.

For the US is 2.9, and for Spain and UK are 1.5 and 1.1 respectively. Spain is an economy with high unemployment, a high deficit and debt and low growth. The UK is suffering through Brexit, massive uncertainty on its future. Meanwhile, the US solidly grows.

Why would investors charge more to the US, perhaps the most powerful country in the world, than to other countries?


texts: The role of Germany's economic growth in the outbreak of the Great War

texts: This Wikipedia article shows that UK's economy was bigger than Germany's economy until 1900, but after 1910, Germany's GDP overtook UK and it became the first European economy. Imperialism is considered as the main cause of WWI. I want to know if this economic race played a role in the outbreak of the First World War.


texts: Prove that if a good is inferior, it is also a Giffen good

texts:
This was asked in my online midterm test, and I proved it using the fact that a Giffen good and an inferior good behave in the same manner with respect to increase or decrease in purchasing power. Although I know that there exist inferior goods that are also giffen, I'm not able to find a rigorous proof.
Thank you for your help.
Edit 1 :As pointed out in the comments, I feel its necessary to clarify some aspects of the question Firstly, the proof can be mathematical or verbal with the support of a graph. Secondly, this is the original question, it was not given the other way round. The question was preceded by the statement "A Giffen Good is a highly inferior good" and then the question was given.


texts: WARP implies completeness, transitivity and thus rationalizability. What is wrong with the statement?

texts:
Let $A$ be a menu and $R$ be a complete and transitive binary relation. Define choice correspondence generated by $R$:

$$c_R(A)=\{x\in A|| xRy \ \forall y\in A\}.$$

Theorem (from Kreps 1988): for any correspondence $c$, the following conditions are equivalent:

$c$ satisfies WARP
There exists a transitive and complete $R$ such that $c=c_R$.

Given $A$ is finite and $c=c_R$, it is obvious that $c$ can be represent by a utility function. Then why do we need SARP/GARP to rationalize a choice correspondence with a utility function? What was wrong with my logics?


texts: Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?

texts:
As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to 2008 we would see the ensuing years saw a large increase in China's FX reserves.

I can think of a few possible explanations ranging from political tension to dollar liquidity needs, but I don't think I can take my explanations beyond conjecture.

Question

What is a logical explanation for the recent divergence between Fed liabilities and China's FX reserves?


texts: General Equilibrium Involving Production

texts:
I need a little conceptual clarification.
For a standard $N*K*M$ general equilibrium model, would an allocation, say, $y^k$ be Pareto Optimal if it does not solve $max(py^k)$?
I understand that the competitive allocations would Pareto Optimal given strictly convex, monotonic utility functions, but does the implication hold reversely as well?


texts:
Let us say the estimated equation for the economy’s aggregate demand is
Y = 400 – 15P + 8G
And the estimated equation for the economy’s aggregate supply is
Y = 5 + 11P – 10W
where Y is the country’s real GDP, P is the price level (GDP deflator), G is government purchases of
goods and services, and W is the index of wages.
If G = 160 and W = 100, find the equilibrium real GDP and the price level in the economy.What is the simple multiplier in this economy? Give the number
Attempt:
400-15(P)+8(160)=5 + 11P – 10(100)
400-15(P)+1280=5+11P-1000
400+1280-5+1000=26p
p=102.88
Y =400 – 15P + 8G=136.8
Y = 5 + 11P – 10W=136.68
y=136.73
n=14066.7824
k=1/1-mpc
mpc=??
Not sure what to do from here? Seems I need I,C but no way to find those values from numbers given to me.


texts: Is it constant returns to scale if the output of a production function is purely a function of one variable?

texts:
For $Y=F(K,L)= 2L$

If I multiply them by an constant $z$:

$Y= F(zK,zL0)$, i'll get $2(zL) = z(2L)$. Inputs increase proportionally therefore constant returns to scale.

This doesnt seem right because the outputs are determined by one variable.


texts: Calculate optimal discount for product bundling

texts:
So recently I made some rules with my transaction data. Based on it I can determine which products are profitable to bundle it together.

But even though I know e.g. product A→ product B, are there any ways to determine how many bundles will be sold based on the discount value?

E.g. out of the 100 transactions with product A for price X and there are 40 transactions with product B for price Y(I know lift value might be better but let's keep it easy for now), if product A and B are bundled together, what is the discount rate to increase the optimal short term sales?

I do have products sold for product A and B for different kind of discount, so I was thinking using price elasticity to determine the discount for the bundle because if you know the price you know the quantity, but I dont think it is the right way of thinking and there is no price elasticity for both products.

The data I have:

Price of the product

Lift, support, confidence values and other values related to rules.

sold product per month

Discount value per product

I think these variables are more crucial.

Any suggestions would be appreciated.

Thanks in advance!


texts:
I have monthly shock series, which I want to convert to quarterly form. I have seen several methods like taking average of 3 months or summing 3 months for making a quarter. I would like to know how I can know which method is useful for me. Taking average or summing? Or is it something about personal choice in research methodology?
More details:
I intend to get impulse responses of real GDP to news shocks (which are already available). My GDP series are in quarterly form and my shock series in monthly form. So I need to convert shock series to quarterly form and do local projections.


texts: Straffin, P. D. (1993): Game Theory and Strategy. How is the security level on p. 103 calculated?

texts:
Could somebody explain how Straffin calculated the security levels for Rose and Colin on p. 103? As far as I understood, Colin's security level is 6 because it is the minimum of the strategy Colin A because Colin A dominates Colin B. If both, Colin A and Colin B were considered, Rose should follow a mixed strategy of 8/9 for Rose A and 1/9 for Rose B, which leads to a security level of 20/9, but only if Colin A was considered. I don't understand, how Straffin came to the security level of 10/3 for Rose and why the strategy BA should be played at least 1/3 of the time.

Here are the two pages that describe the problem (I apologize for the bad resolution):


texts: Including definite integrals inside definite integrals - Crossposted from MathSE

texts:
This question is cross-posted from MathSE: link

I have the following differential equation from a journal article:
$\dot{g}(t) - \delta(t)g(t) = -H(t)  --- (1) $,
which is integrated between t and T. t is time and T is a terminal (scaler) time point. The functions are implicitly defined on time (t).

The solution I have (from the same article, no steps shown) is:

$g(t) = g(T)e^{-\int_t^T \delta(u) du} + \int_t^T H(u)e^{-\int_t^u \delta(s) ds} du --- (2) $

I understand that the solution is obtained by using the integrating factor:
$IF = e^{\int_t^T \delta(u) du}  $.
This means that in the penultimate step of the solution, I will have something like
$g(t) = g(T)e^{-\int_t^T \delta(u)du} + e^{-\int_t^T \delta(u) du} \int_t^T H(u) e^{\int_u^T \delta(s)ds} du  --- (3)  $

If (3) gives (2), then it must be true that

$e^{-\int_t^T \delta(u) du} \int_t^T H(u) e^{\int_u^T \delta(s)ds} du = \int_t^T H(u) e^{-\int_t^u \delta(s)ds} du --- (4) $

with the understanding that u is considered to be a future time point relative to t.

What I do not understand is the exact reason why (4) is correct. From my understanding one possible explanation could be that the first term on the left hand side of 4 is implicitly a function of t which is why it can be included under the integral of the second term on the left hand side where the functions are being integrated between two values of t, namely t and T. But I am unsure if this is an accurate way of describing this.

Is there a theorem/result that supports/invalidates my way of thinking and is there a way to explain (4)?

The paper in question is A Model of the Demand for Longevity and the Value of Life Extension.  The equation and the solution are numbered (17) and (18) respectively. I am presenting those here without some of the extra terms.

Clarification on the numberings in the question:

The numberings (1)-(4) in the question are mine. (1) in the question is a simplified version of (17) in the paper and (2) in the question is a simplified version of (18) in the paper.


texts: Can a MS-VAR(1) be discretized to a Markov-chain the same way a VAR(1) has a discrete approximation?

texts:
It is well known via Tauchen (1986) that a VAR(1) process can be approximately fairly well (in the absence of persistence) by a discrete Markov-chain if the innovation is distributed standard normal.

Can a MS-VAR(1) be approximated in the same manner?


texts: Is GDP the market value of goods consumed or goods produced in a time period?

texts:
Definitions across various resources state that GDP is the market vaue of all goods 'produced' in a certain time period. But while calculating GDP by expenditure method, consumers' spending is one of the components (GDP= consumer spending + Firm's investments + Government spending + net exports)
Suppose a manufacturer produced goods in Q1 and customers bought those goods in Q2 from an inventory, will Q1 GDP increase or Q2 increase due to this purchase?
Sorry for the rookie question


texts: Housing econometrics: interpretation of a quadratic variable

texts:
I'm working a location based home pricing model and I have a regression which looks like this:

$$Price=\beta_0+\beta_1x_1+\beta_2x_1^2+\beta_3x_2+\beta_4x_2^2$$

where $x_1$ is longitude and $x_2$ is latitude.

I'm finding statistical significance in longitude, longitude squared and latitude squared but not in regular latitude itself. I know that in economic theory quadratic terms are used to capture the effect of diminishing returns, but in this case I find it odd that the quadratic is significant but the regular variable isn't.

How do I interpret these results?


texts: Is there a solution to the Joker's game in The Dark Knight?

texts:
In the final battle in the movie, the Dark Knight (2008), the Joker has rigged two ferries carrying people out of Manhattan Gotham to explode. One ferry carries mostly civilians with a substantial National Guard presence. The other ferry contains large numbers of prison inmates and some guards. The Joker has rigged both to explode, and he has given the crew on each boat the detonators — only they have the detonator for the other boat. He announces the rules of the game to the crew and passengers of each vessel.

  Each of them have the power to blow up the other boat and then their boat will live.
  If they get to midnight with know no exploded boats, the Joker will detonate both.
  Any attempt to leave or defuse the bombs will result in the destruction of both boats.

Is this a known variant of the prisoner's dilemma? How to model this game and what is the actual solution? Why is the equilibrium as shown in the game attained?


texts: Prove that budget constraint is Lower Hemi Continuos (LHC)

texts:
I need to prove that the following constraint is LHC.
$B=\{x \in R^n : px\leqslant pw)$
But Im not capable of finding and sequence $\{x_n\}$ such that $x_n \in B(p_n,w_n) \forall n$ and that $x_n\longrightarrow x$.
I tried with setting  $x_n=\frac{x}{1+\beta^n}$, $p_n=\frac{p}{1+\beta^n}$ , $w_n=\frac{w}{1+\beta^n}$ because in that case $x_n\longrightarrow x$. and $x_n \in B(p_n,w_n) \forall n$ but I thing I'm not covering the $\forall p_n, w_n$ part.
Help please and thanks in advance.


texts:
Assume that preferences are given by a utility function is given
$$u(x_1,x_2) = (x_1^\rho + x_2^\rho)^{1/\rho}$$
what then are the Marshall demand given budget constraint
$$p_1x_1 + p_2x_2 \leq I$$


texts: Why is the Fed worried about short term interest rates going negative?

texts:
I refer to the following article: https://www.bloomberg.com/opinion/articles/2021-02-25/negative-interest-rates-could-be-trouble-unless-fed-acts, notably the following paragraph:

Market observers worry that this wall of liquidity could push short-term interest rates into negative territory. Although no one can be sure of the ramifications, this could prove disruptive to money-market mutual funds and to the functioning of short-term lending markets more generally. The surge in reserves will also add to banks’ assets, potentially causing them to bump up against regulatory leverage requirements, which limit the ratio of their total assets to equity capital. This, in turn, could cause some banks to pull back from lending against securities, potentially triggering yet another disruption in the “repo” market, a crucial source of financing for hedge funds, investment banks and many other institutions. Banks also might take steps to encourage households and businesses to take their deposits elsewhere.

How does negative short term interest rates disrupt the repo market in any way?


texts: Optimal consumtion bundle of lemons and sugar

texts: Alex consumes only lemons and sugar. For each lemon he requires exactly 2 spoons of sugar. He doesn't like more sugar on his lemons, and he won't eat lemons with less sugar. What is Alex's optimal consumption bundle?Write down the precise quantities of each good.(Assume that the price of each lemon is 20 and the price of a spoon of sugar is 1. Alex has 44 to spend on lemons and sugar)


texts: Generally speaking, shouldn't GDP roughly increase equivalent to population growth?

texts:
With all things being equal: shouldn't the GDP roughly increase equivalent to population growth (as a minimum, setting aside GDP increases resulting from technology, education, and all other factors).

Obviously there are a lot of factors that affect GDP.  However, in general, GDP in one way measures the 'productivity' of a certain population.  If that population increases, shouldn't it naturally follow that the overall productivity will increase proportionally (assuming normal population growth, rather than an influx of invalids, etc).  I assume there would be time-delay in the response of the GDP, dependent probably on the nature of the population growth.


texts:
Consider a cost function that is continuous, differentiable and (possibly) convex: $c(x):\mathbb{R}^+\to \mathbb{R}$. I was wondering if there is a "common" way to interpret the expression:
$$xc'(x)$$
in terms of economic intuitions. Any suggestions or references?


texts: Verifying rationalizability of pure strategy

texts:
Consider a static, complete information game with 2 players.
Strategy sets are $S_1=\{U,D\},S_2=\{l,m,r\}$.

Payoffs are irrelevant to this question as I am trying to get the concept of rationalizability correct.

Suppose I want to verify whether $m$ is a rationalizable strategy for player 2.

Then, I want to ask the following question:

$\exists \sigma_1=(q^*,1-q^*)\in\Delta(S_1)$ such that for $\sigma^*_2=(0,1,0),$ $u_2(\sigma_1,\sigma^*_2)\geq u_2(\sigma_1,\sigma_2)$ for all $\sigma_2\in\Delta(S_2)?$

Now, suppose I have payoff matrix such that I could find $(q^*,1-q^*)$ such that it satisfies both:

(1) $u_2(\sigma_1,\sigma^*_2)\geq u_2(\sigma_1,(1,0,0))$
(2) $u_2(\sigma_1,\sigma^*_2)\geq u_2(\sigma_1,(0,0,1))$.

This means, I could find a valid range of $q^*$ such that for player 2, choosing $m$ provides a weakly better payoff for her compared to the degenerate (i.e. pure) strategies of $l$ or $r$.

My question is:

If I could find such $q^*$ that satisfies both (1),(2), then I do not have to check for any other strategy profiles in $\Delta(S_2)$, that is any convex combo of $(1,0,0)$ and $(0,0,1)$? My intuition is that for any $\alpha\in[0,1]$, I could simple have:

(1)' $\alpha u_2(\sigma_1,\sigma^*_2)\geq \alpha u_2(\sigma_1,(1,0,0))$
(2)' $(1-\alpha)u_2(\sigma_1,\sigma^*_2)\geq (1-\alpha)u_2(\sigma_1,(0,0,1))$.

and show that (1)'+(2)'implies the degenerate strategy $m$ for player 2 is a best response to some belief, $\sigma_1\in\Delta(S_1)$. Hence, the bottom line is (1),(2) is sufficient, and I do not have to check the convex combo of the two other pure strategies.


texts: Notation of a Cobb-Douglas function printed in 1989

texts:
I am trying to understand a paper written back in 1989 about long run population growth. It seems like the PDF is a scanned image of the paper.

The notation for the function is on page 11 of the pdf (here):

Is it:

$$ Q_t = A_t*(K_t^\alpha N^t_\beta T_t^\rho) $$

or

$$ Q_t = A_t*(K_t^\alpha N^\beta_t T_t^\rho) $$

Im not sure its a typo or not because it shows up the same way later in the paper on page 14.

*Edit:  I also have no idea what $\hat c$ is in the paper:

I don't see where it is defined.  Only where consumption is compared to it.


texts: Production Possibility Frontier and Opportunity cost

texts:
The following is a list of data points on a PPF, answer questions regarding opportunity cost.

What is the opportunity cost of producing the first 500 Toyota?

The opportunity cost of producing the first 500 Toyota is 600.
Calculations: 5000-4400

What is the opportunity cost of moving from producing 3725 Lexus to 3950 Lexus?

Opportunity cost = 1500-1000 = 500 Toyotas

What is the opportunity cost of producing 5000 Lexus?
The opportunity cost of producing 5000 Lexus is 0.

I am currently learning economics and I came across a homework question I am uncertain about my answers.


texts:
I was wondering whether there is a neat overview over different interpretations of game theoretic solution concepts such as Nash equilibrium, Sequential Equilibrium and the like.

Textbooks I found incredibly lacking in this respect (they have the tough job of getting the mathematical definitions across). Often, for Nash equilibria they allude to some "consistency" or "steady state".

My question is therefore both a reference request and perhaps a call to create a nice overview over different interpretations of equilibrium concepts in game theory. If you feel this question is too broad, it may make sense to narrow it to Nash equilibria.


texts: In question c-f. .Why do they calculate $t=3$? When they say $t=4$ at the beginning and then next year is $t=4+1=t=5$


texts: Monte carlo simulation for macroeconomist

texts: I would like to know if it is useful to learn Monte Carlo simulations if I want to focus on macroeconometrics ? Or even is it useful outside of academics ?


texts: What is the difference between HM Treasury and HM Exchequer?

texts: Both terms refer to collecting tax revenue, right? What's the difference then? I hoped the relevant Wiki pages would help but they didn't.


texts: How can you interpret one of the parameters of optimal consumption at the Merton portfolio problem?

texts:
Statement: Let the dynamics of wealth of the agent satisfy
$$dX_{t} =
 \pi_tX_t\Big(\mu dt+\sigma dB_{t}\Big)- c_t X_t dt, \qquad \textrm{with}\quad X_0=x_0 \in \mathbb{R},$$
where $(\pi,c)$ is an investment-consumption ($\pi$ - fraction of wealth to invest, $c$ - fraction of wealth to consume).
Under standard Merton optimization problem the agent is to maximize the expected utility $$J(\pi,c) =\mathbb{E}\Big[\int_0^TU(c_tX_t) dt +  U(X_T)\Big],$$
under CRRA power utility $$U(x) = \frac{1}{1-\frac1\delta}x^{\frac1{1-\frac1\delta}}, \quad \delta > 0, \delta\neq 1,$$ so $\delta$ plays a role of risk-tolerance parameter.
The optimal plan is then given by $$\pi^* = \frac{\mu}{\sigma^2}\delta,\quad c^*_t=\Big( \frac1{\beta}-\big(1-\frac1\beta\big)e^{-\beta(T-t)}\Big)^{-1},$$
where $\beta = \frac{\mu^2}{2\sigma^2}\delta(1-\delta).$
Question: How can I interpret $\beta$ at this point? I have seen that $\frac{\mu^2}{2\sigma^2}\delta$ is sometimes referred to as expected portfolio return. But what is the meaning when I multiply it by $1-\delta$? If $\delta > 1$, it can be negative. I would call it effective expected portfolio return, but am not sure. If you can provide any reference, that would be perfect.
Thanks in advance!
P.S. I was adapting my model to the standard Merton one, sorry for any discrepancies.


texts: how to adjust price data due to clock changes?

texts:
I'm trying to analyze the hourly price variation of the electricity market. However, because of clock changes, due to daylight saving time, we have a missing hour in March and an additional hour in October. I have to do some minor adjustments but I don't know how to it.

I would like to do an interpolation on the missing hour and average the doubled hour (Uniejewski did this in his paper DOI 10.1109/TPWRS.2017.2734563). But it will have a significant impact on generation patterns, since the solar peak that was at 12:00 in spring before clock change will move to 13:00 in spring and summer after the clock change.

Can anyone provide with with an idea or suggestion？ Thanks in advance.


texts: Why did creating the Eurozone cause the cost of labor to rise in Greece?

texts: As I understand the implementation of the Euro as a common currency caused labor prices to spike in certain countries, Greece being one of them. Why did this happen? Why did it affect certain countries more than others?


texts: Discrepancy of GDP and International Transaction Releases for Exports

texts:
The Bureau of Economic Analysis ("BEA") provides consolidated data from several different government agencies. Currently they provide exports under both a Gross Domestic Product ("GDP") release as well as a International Transaction release. My questions are: 1) What is the difference between these two measures and 2) What are the corresponding export series in FRED for both releases?

Here are the links to the BEA data sources:

1) GDP Release: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey

2) International Transaction Release:
https://apps.bea.gov/iTable/iTable.cfm?ReqID=62&step=1

I should add that I have been attempting to retrieve the data from FRED for goods and services separately (both releases). Here is a link of where I am so far:

https://fred.stlouisfed.org/graph/?g=nPkt


texts: Change in optimal savings due to increased risk

texts:
Currently I am working out advanced micro problems that deal with household's optimal savings behavior. Although I think I understand the material quite well, I am not sure about the specific detail of the solution of the following (shortened) problem.

Let $u: \mathbb{R}_+ \to \mathbb{R}_+, c_i \mapsto c_i^2$ be the (consumption) utility function for the two time periods $i \in \{1,2\}$. Assume that the income $y_2$ is risky with riskiness represented as $\beta$ and $\beta$ being a mean-preserving spread. What can you say about the change in optimal savings if $\beta$ increases?

My thoughts about this are as follows. What we are looking for here is the sign of $$\frac{ds^*}{d\beta}$$

where $s^*$ denotes optimal savings. In the lecture we showed that its sign only depends on the sign of $$K = \frac{d\mathbb{E}[u']}{d\beta}$$ Since $\beta$ is a meaning-preserving spread we then said that the sign of $K$ only depends on the sign of $u'''$, i.e. that $K < 0$ if $u''' < 0$ and vice versa but we omitted the case $K = 0$. But since $u(c_i) = c_i^2$ it is $u''' = 0$.

My questions are thus

What is the conclusion if $u''' = 0$? Is it the same as the positive (> 0) case?
Why exactly do we, if $\beta$ is a MPS, only need to care about the argument's second derivative in order to determine the sign of the expectation?


texts: Why do rich and poor countries trade in different goods and why do rich countries trade in similar goods with other rich countries?

texts: I think that differences in climate is one key factor but I think it could be explained by David Ricardo's theory on international trade differences???


texts:
A high number of co-authors on scientific papers is not uncommon, but in economics I rarely see one with more than 5 coauthors.
Does anyone know the paper in economics that has the highest number of co-authors (whether wp or journal article)?


texts: Where can I find data related to foreign remittances?

texts:
I am doing research related to remittances, where can i find a good source of data?

Thanks


texts: If $\succsim$ is transitive but irreflexive, then it is asymmetric, proof

texts:
If $\succsim$ is transitive but irreflexive, then it is asymmetric.

this is my proof:

Suppose $\succsim$ is not asymmetric, which means that for any $x,y \in X$ $x\succsim y \rightarrow y \succsim x$. By definition $\succsim$ is transitive, i.e. for any $x, y, z \in X$ we have $x \succsim y$ & $y\succsim z$ $\rightarrow$ $x \succsim z$. So since we are supposing $\succsim$ is symmetric:  $y\succsim x \rightarrow x \succsim$ y. Now since  $\succsim$  is transitive  $y \succsim x$ &  $x\succsim y \rightarrow y \succsim y$ but  $\succsim$  is irreflexive so it's a contradition and  $\succsim$ is asymmetric.

What do you think of my proof, is it wrong or not clear enough?


texts: Why is the equilibrium price not anything between \$0 and \$200?

texts:
Consider the second problem below from Varian’s Intermediate Microeconomics:

  Suppose that there were 25 people who had a reservation price of \$500, and the 26th person had a reservation price of \$200.

  In the above example, what would the equilibrium price be if there were 24 apartments to rent? What if there were 26 apartments to rent? What if there were 25 apartments to rent?

For 24 apartments, the equilibrium price is \$500, and for 25, it’s \$200–\$500. So far, the answers in the back agree. However, for 26 apartments, I think the the equilibrium price should be \$0–\$200, whereas the book just says \$200 flat. I draw the supply-demand curve like this, where the blue line represents supply and black is demand:

Here’s a screenshot of the answers for reference:

Is the textbook correct, and if so, what am I missing here?


texts: Variance in the Context of a AR (1) Model

texts:
I wondered if someone could help me in terms of the required algebraic steps from expressions (3) - (4), for the the moving average representation of the AR (1) below?
Would be appreciated.
$$y_t=a +\theta_1y_{t-1}+u_t$$
$$var[y_t]= E([(u_t+\theta_1u_{t-1}+\theta^2u_{t-2}+...+\theta^{t-1}u_1)]^2)$$
$$var[y_t]= \sigma^2(1+\theta^2+\theta^4+...+\theta^{t-1})$$
$$var[y_t]= \sigma^2\frac{ 1-\theta_1^{2t}}{1-\theta_1^2}$$


texts: Why does the Solow Model matter for undergraduate students?

texts:
I've been looking at the economics undergraduate curriculum and have been thinking and wondering as to what specific skillset we want to equip undergraduate students with in the working world.

One can think about this by thinking about the ideal career outcomes of economics undergraduates. Most undergraduates with economics degrees should ideally end up in two occupations* (ideally meaning that their education will correspond to a desired occupation):

Data Analyst (using exclusively data to identify actionable information)
Business Analyst (using data and qualitative information regarding the economic environment relevant to a given business to identify actionable information).

With these two ideal career outcomes in mind its very clear as to why intermediate microeconomics, econometrics and market macro makes a difference. However as to why the Solow Growth model is taught on the undergraduate level is a bit confusing for me and Im left with any satisfactory answer.This is a relevant question because its a part of the core undergraduate macroeconomics education so its relevant for even those not intending to go to graduate school.

In terms of specific career outcomes (it could be that this list is lacking) why is studying the Solow model relevant for the undergraduate student who does not intend to go to graduate school?

EDIT: Im not coming to say the solow model is useless, im asking why this is a part of the core economics curriculum. I myself am interested in economic growth in terms of understanding the economy and its fluctuations. Additionally I'm an economics educator not a student so these questions do come up in classes where im responsible to respond to them.


texts: Comparing Real GDP with different base years and currencies

texts:
I have a quarterly panel data of several countries. I have taken the data from Fred. Some countries' real gdp is in chained 2010 prices and some in other years (such as 2015 and 2018). How can I make it in the same basis?
And also these quarterly series are in their own national currencies. In order to have the common series, I have to change it to common currency. So I have taken data on PPP for GDP from the website of OECD. So my other question is that if my real gdp series are in chained 2010 prices, should I simply use 2010 exchange rate only for converting real gdp to another currency?


texts: When building a social accounting matrix, do you input domestic intermediate demand or total intermediate demand?

texts:
I have been trying to build a social accounting matrix (SAM) after building an input-output table (IOT). In the IOT, I had to distinguish between total intermediate demand (which includes import of intermediate products) and domestic intermediate demand (which excludes imports). Therefore, I had to look at trade data to perform a breakdown of imports per intermediate and final products.

I was wondering if SAMs also used this breakdown of imports information. Since IOTs are used as a source of information to build a SAM, I figured it would. I know SAMs include intermediate demand information (see the following image, it's called intermediate inputs), but I don't know if it refers to total demand or domestic demand. Does anyone know?

Thanks in advance!


texts: How can protectionist policies keep wages low?

texts:
A German economist who also worked at the ECB notes that:

Germany’s bilateral trade surplus with the US has barely changed, despite substantial swings in the euro-dollar exchange rate – which was as high as €1:\$1.60 in 2011, and as low as €1:\$1.04 more recently. Germany owes its export success not to currency manipulation, but to its strong market position and the pricing power of its highly specialized manufacturing champions. [...]
The euro is not too weak, and German exports are not too high. Rather, the problem is that Germany’s imports are too low, owing to its huge investment gap. [...] The gap is the result of policy failures – namely protectionist policies in the non-tradable services sector. The International Monetary Fund, the European Commission, and the OECD have long tried to convince Germany to deregulate services, curtail vested interests, and improve competition. But, as it stands, wages, productivity, and investment remain high in the German export sector, and low in the non-tradable services sector.

How can protectionist policies keep wages low, e.g. in services? Usually protectionist policies (e.g. tariffs on imports) tend to increase wages by protecting the local workforce from outside competition. A typical form of barrier to entry in services, namely professional licenses also increase wages (by decreasing labor supply) as far as I know. So how can protectionist policies achieve the opposite effect of lowering wages, particularly in services sector?


texts:
I want to prove that if a utility function that represents $\succsim$ has constant marginal elasticity of substitution (MRS) in proportional expansions along rays, that is:
$$
MRS(x,y) = MRS(\alpha x, \alpha y), \ \forall \alpha > 0
$$
then $\succsim$ is homothetic.

The definition of homothetic preferences that I'm using is the one found in Mas-Colell et al.:

Definition 3.B.6: A monotone preference relation $\succsim$ on $X=\mathbb{R}^L_+$ is homothetic if all indifference sets are related by proportional expansion along rays; that is, if $x \sim y$ then $\alpha x \sim \alpha y$ for any $\alpha \ge 0$.


texts: Is a strong foundation in advanced microeconomic theory essential to study environmental economics at the graduate level?

texts: Advanced theory of individual economic behaviour in production, consumption, and general equilibrium. Are these topics useful to study environmental economics a the graduate level, or is there not a lot of overlap?


texts:
i  have the value  added  of  a  company for 2 years  2016  and  2017  so  to  compare these  values and to see its evolutioon i divided the value of 2017 by  the one of  2016

but  some friends told me that the comparison i am doing is false because  values should  be calculated using  same  price  base

so  what should i do to have a correct  evaluation  ?

thanks a lot  in advance for  any help


texts: Can game theory be used to predict economic specialization (division of labor)?

texts:
There is a hint of a connection to game theory in Adam Smith's Wealth of Nations. For example, he says:

  It is not from the benevolence of the butcher, the brewer, or the
  baker that we expect our dinner, but from their regard to their own
  interest.

We can put his general argument into a payoff matrix, like shown below:

There are two Nash Equilibria here: {DS,DS} and {S,S}.

Obviously, if they both specialize, they are both much better off. However, each of them not specializing is also an equilibrium.

Is there any way that Game Theory predicts the emergence of specialization in a population of such players?


texts: What guarantees that for every credit there is a debit in an electronic fund transfer?

texts: I'm worried about the difference between seeming honest and actually being honest.  I know banks rely in part on a good reputation to stay in business.  But it seems to me that as long as a bank has a plausible argument that they acted in good faith, they are free (and perhaps indeed it might be greatly in their interest) behind the scenes to be arbitrarily dishonest.


texts:
I am solving some micro related exercises and I came across this weird Leontief production function: $$Q =\left(\min\{K, L\} \right)^b$$

I am not sure how to solve it. I have to find the inputs' demand, cost function etc.... Should I solve it as $K^b=L^B=Q$ and then proceed as usual with the standard Leontief?


texts: What exactly does "carriers of utility" mean?

texts:
I understand what 'utility' mean in economics.

While reading "Choices, Values, and Frames" by Daniel Kahneman I encountered above usage. I guess it means 'what utility is attributed to'. Google showed that this usage is common in economics literature, but I couldn't find a definition or an explanation.

What is the definition, if there is one? And if not, how best to interpret this phrase?

(Edit) Examples:
From above book (p-xii):

The proposition that the carriers of utility are states of wealth is accepted as a matter of course in economic analyses and in the prescriptions of decision analysis.
The idea that the effective carriers of utility are gains and losses was not now.

In "Decision, Probability and Utility: Selected Readings" by Peter Gärdenfors and Nils-Eric Sahlin:

As regards the conceptualization of utility, a fundamental question is what kids of entities can be assigned utilities. Or in other words, what are the carriers of utility? ...


texts:
Suppose we have the following market-clearing condition for the goods market within a New-Keynesian setting:
$$
c_t = (1-\alpha)(1-\frac{\phi}{2}\pi_t^2)y_t + \alpha (1-\frac{\phi}{2}\pi_{t-1}^2)y_{t-1},
$$
where $\pi$ denotes inflation. Can I consider $\pi_t \equiv\pi_{t-1}$ here in this equation? I know we do this in the case of steady-state. Is it the same for inflation here in the equilibrium too?
Moreover, as a general question, can we have GDP ($y_t$) from the previous period in the market-clearing condition as I have here? I came up with this equation since part of the labor income from the previous period is invested in period $t$.


texts: Converting a GDP series to constant international dollars

texts:
I want to convert a GDP series (I have it in current euros) of a country to constant 2005 international dollars. My idea is to divide the series by year 2005's $PPP$ conversion factor (the exchange rate) and adjust for inflation by dividing the whole series by the country's GDP deflator $(base \; year=2005)$.

Is this the right way to go? Do I need to adjust for inflation?


texts: Project Financing Evaluation and accounting

texts:
While evaluating the whole entrerprise value of Falck Renewables using the discounted cash flow method I end up with a negative continuing value and economic profit due to the negative spread between weighted average cost of capital (WACC) and Return On Invested Capital's (ROIC) values. The final evaluation is very low (100M€ vs 900M€ from other methods). The debt/equity ratio of the company is 70%/30% and 90% of that debt is project financing.

The problem is that the massive amount of debt from project financing weighs heavily on the ratios and leads to very negative results. How can I handle the project financing debt to get a more consistent results?

Some thoughts:

I could devalue the financial value of debt and investment using a project specific WACC (which would have to be lower than the company one)
I could change the accounting of the debt | investment restating a the longest ones as non-operating assets and debts? Or by depreciating.


texts: What were "scissors prices" (China, 1950s)?

texts:
Chan (2018) writes:

  Implementing such a strategy, the state siphoned off resources in the rural sector for capital accumulation in industry through the well-known process of "scissors prices".

What was the well-known process of "scissors prices"?


texts: Producer's cost for buying full solution vs. buying parts

texts:
This may be a very basic question.

From a producer's standpoint, what are the theoretical or empirical results on the comparison of cost between buying assembled or full solutions from suppliers vs. buying individual parts from suppliers?

For example, hypothetically speaking, a car manufacturer may choose between multiple assembled braking systems from different suppliers, or, may decide to assemble the system itself and choose between multiple suppliers for each component of the system.

Intuition suggests that buying individual parts and assemble itself has lower cost than buying the full solution even if there are multiple solution providers, as long as the manufacturer has sufficient capacity in assembling. But I wonder if that is the case in every scenario, e.g. in the car manufacturing example above.


texts:
Assume a two player symmetric game is given by $n\times n$ payoff matrix $A$ for the row player (and $A^t$ for the column player).

Let $B$ be a matrix such that $\forall i,j\in [n]:B_{i, j}\geq A_{i,j}$.

Assume $a$ is a symmetric equilibrium in $A$, $b$ is a symmetric equilibrium in $B$ and that $a$ and $b$ has the same support.

Does it mean player's payoff under $a$ (playing matrix $A$) can not be larger than the payoff of playing $b$ in game $B$?

Formulating the claim in linear algebra:

Let $A,B\in [0,1]^{n\times n}$ such that $\forall i,j\in [n]:B_{i, j}\geq A_{i,j}$.

Denote by $\Delta $ the set of probability distributions over $[n]$.

Let $a,b\in \Delta$ be two distribution vectors.

Does

$\forall x\in \Delta: x^tAa\leq a^tAa \ \ $ (i.e. $a$ is an equilibrium for $A$)
$\forall x\in \Delta: x^tBb\leq b^tBb \ \ \ $ (i.e. $b$ is an equilibrium for $B$)
$\forall i\in [n]: a_i>0 \iff b_i>0  \ \ $ ($a,b$ have the same support)

Imply
$$a^tAa\leq b^tBb?$$

If not, does the answer change if $A,B$ are symmetric?

Notice that without the support condition, the claim is false, for example-

$A=
 \left( \begin{array}{ccc}
1 & 0 \\
0 & 0.1 \\
\end{array} \right) $
$B=
 \left( \begin{array}{ccc}
1 & 0 \\
0 & 0.5 \\
\end{array} \right) $

$a=
 \left( \begin{array}{ccc}
1 \\
0  \\
\end{array} \right) $
$b=
 \left( \begin{array}{ccc}
0 \\
1  \\
\end{array} \right) $


texts: Effect of Strengthening US Dollar on Commodities

texts:
Many commodities are prices in US dollars. If the Dollar strengthens, then commodities (in non-US countries) will become more expensive. From the consumers' (suppliers') point of view, this should be a move along the demand (supply) curve, not a shift since nothing has inherently changed in their demand or supply of the actual commodity. For a stronger dollar, a consumer will simply demand less.

Then why is it that a strong US dollars is highly correlated with low commodity prices? Is the efficient market adjusting to pre- strong dollar levels?


texts: Should Company B enter the market in the following cases

texts:
Say Company A has a monopoly producing product E, at a constant marginal cost of $3$ USD. Say the ideal number of units produced is $1$ unit which produces a profit of $2$ USD (=$P_{A}$).

Next, Company B wants to enter the market and produce product E at a marginal cost $3$ USD, but it has initially invested $\frac{1}{2}P_{A}$ in order to enter the market.

Question:

$1.$ Under Cournot Competition, should Company B enter the market. Why/Why not?

$2.$ Under Bertrand Competition, should Company B enter the market. Why/Why not?

Ideas:

$1.$ No, since we are in Cournot competition, the price is determined by the total units that both Company A & B produce together. If Company B were also to produce, it would drive the price down as a result of excess supply, eventually forcing the price below the marginal cost, thus not profitable

$2.$ Yes, the price is driven down until the marginal cost. Although Company B will earn $\frac{1}{2}P_{A}$ less than company A.

Do my answers suffice, or rather, are they correct, and touch on the right point?


texts: How does FRED Quarterly Real Gross Domestic Product and USA GDP growth rate match?

texts:
https://fred.stlouisfed.org/series/ND000334Q
From this not seasonally adjusted data, Q2 GDP merely dropped 1-4305/4674=8% QoQ? What makes this number to be so different from the 32.9% decline they published today supposedly calculated form the seasonally adjusted GDP data?
https://fred.stlouisfed.org/series/GDPC1


texts:
I'm studying financial derivatives, and became curiosity in volatility products, more specifically volatility swaps. It always intrigued me how can you create products based on volatility. Who is interested in buying them? Other than traders who want to speculate with the volatility I can't image how a large corporation could find a seller/buyer for this kind of product.

How can volatility swaps be used to reduce the risk of volatility in the markets (hedging strategies)? How is their fair value calculated?


texts: What does a "sell-off" mean if every stock transaction is balanced?

texts:
If every stock transaction is "balanced" (1 sell = 1 buy), then what does a "sell-off" actually mean and how does it move the price of a stock?

Ex. If millions of people sell a stock, there's necessarily an equal millions of buys of that stock.


texts: Log-linear version of the uncovered interest rate parity

texts:
I am trying to derive the log-linear version of the uncovered interest rate parity under complete asset markets.

I know that the UIP condition is given by

$$(1+i_t)=(1+i^*_t)\frac{S_{t+1}}{S_t}$$

I have seen in papers that the log-linear version is simply given by

$$\hat{i}_t-\hat{i}^*_t=\hat{S}_{t+1}-\hat{S}_t$$

but I cannot see how this is derived. According to me, the log-linear version should be

$$\frac{i}{1+i}\hat{i}_t-\frac{i^*}{1+i^*}=\hat{S}_{t+1}-\hat{S}_t$$

Could someone please write down all steps to obtain the log-linear version of the UIP?

Thank you very much


texts: Difference-in-differences with long time horizon and repeated treatments

texts:
I have a high-frequency panel dataset on the order of $i=150$ and $t=5000$. I am interested in studying the causal impact of a treatment with the following characteristics:

The same unit can be treated several times
Different units can be treated at different times
The effect of the treatment does not spill over beyond the current time period

Here is an example of treatment over time (where black indicates treated, and the y axis contains a row for each unit $i$):

Here is an example of a treated unit (black) and a comparison unit (blue) when treatment is administered (red), where the $y$ axis is an outcome of interest:

Coming from the perspective of causal inference / program evaluation, it seems like the natural approach is to use some sort of difference-in-differences flavored model, where treated units act as controls for untreated units at different points in time. However, I am struggling to find an analogy in the literature.

Typically, in example diff-and-diff models I have seen, units are treated only once, control units are never treated, and the treatment persists into the future.
Also, with such a long time horizon autocorrelation seems problematic, and time-varying, individual-level seasonal fixed effects are likely necessary. Consequently, I expect that I need to make some modifications to the basic panel approach of including fixed effects for $i$ and $t$.

My question is:

Have people used diff-in-diff analyses with similar datasets? If so, could you point me to some sample papers?
Is there an alternative approach that would be be better suited to this setting? If so, are there relevant references? (e.g. from macro, finance, time series literature).

Thanks for any guidance you can provide.


texts: Are government income and government employee wages counted in GDP? (income approach)

texts: The Wikipedia article does not include it nor exclude it.


texts: Central Bank liabilities and assets - Money and Bonds

texts:
I'm reading a book on macroeconomics, and on a chapter on the money market, when explaining how the central banks(CB) determine the interest rate, there is a balance sheet for the CB. In it, under the assets we have bonds, and under liabilities we have currency and bank reserves. My question is which bonds are these? Do these bonds belong to the same country that the CB belongs to? Isn't in this case the bond of the CB a liability/debt that will have to be repaid in the future? Because if so, it seems that we're just exchanging one liability (bond) for another (money).

Or are these bonds from any entities other than the CB itself?

Any help would be appreciated.


texts: Intuition: Difference in price elasticities of demand due to different bases

texts:
Source: pp 91-92, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw

  If you try calculating the price elasticity of demand between two points on a
  demand
  curve, you will quickly notice an annoying problem: The elasticity from
  point A to point B seems different from the elasticity from point B to point A. For
  example, consider these numbers:
  Point A: Price = \$4, Quantity = 120
  Point B: Price = \$6, Quantity = 80

  Going from point A to point B, the price rises by 50 percent and the quantity falls by
  33 percent, indicating that the price elasticity of demand is 33/50, or 0.66.
  By contrast,
  going from point B to point A, the price falls by 33 percent and the quantity
  rises by 50 percent, indicating that the price elasticity of demand is 50/33, or 1.5.     $\color{darkred } { \text { This
difference}}$ arises because the $\color{darkgreen } { \text {percentage changes are calculated from a different base.}   }$

Though I calculated these 2 different price elasticities of demand and understood the last sentence, the big pictures or the deeper intuitions elude me? How can I naturalise this such difference?

What's the intuition behind  $\color{darkred } { \text { This
difference}}$, caused by $\color{darkgreen } { \text {percentage changes [that] are calculated from a different base}   }$ ?


texts:
I have the following example for an imposed quota on the importing of Japanese cars to Europe and it's relative effects:

I am told that $NX=NCO$ (Net exports are equal to National Capital Outflow). I understand we would see a shift to the right in the demand for Euros as relatively Imports have increased compared to Exports, but would we also see a shift in the NCO curve too as the purchase of foreign assets by domestic residents has decreased hence reducing the value of NCO?


texts: What does pilot price mean in the context of marketing?

texts:
In my lecture slide, it is said to be one of the competition-based price determination.

When I searched online, I was unable to find anything relevant.


texts:
Sorry for my bad english, i'll try to explain my difficulty.

1° Question

In the last exam an exercise asked to derivate OLS estimators and calculate their value with the data provided (ex.: $\sum x_iy_i=...$, $\sum Y_i=...$). Now, I know how to derivate them ($\hat{\beta _{0}}=\bar{Y} -\hat{\beta _{1}}\bar{Y}$ and $\hat{\beta _{1}}=\frac{\sum_{i=1}^{n}(X_i-\bar{X})(Y_i-\bar{Y})}{\sum_{i=1}^{n}(X_i-\bar{X})^2}$) but i have difficulties calculating them because data can be "big" ($X$) or "little" ($x$). My prof. tried to explain me that $x=X-\bar{X}$ but my difficulties remain. For example: assuming that $\sum x_iy_i=...$, $\sum Y_i=...$, $\sum X_{i}^{2}=...$ and $\sum X_i=...$: all data are uncertain except the last. I know that $\hat{\beta _{1}}$ can be written like
$=\frac{\sum_{i=1}^{n}X_iY_i- n\bar{X}\bar{Y}}{\sum_{i=1}^{n}X_{i}^{2}-n\bar{X}^2}$: so, how can i transform $x_iy_i$ in $X_iY_i$ to use it in the formula?

2° Question

In light of the problems that i have for the 1° question, i can't write a good form so i ask you if formulas below are corrected:

mean for observed variables: $\bar{x}=\frac{1}{n}\sum x_i$
variance for observed variables: ${s_{X}}^{2}=\frac{1}{n}\sum (x_i-\bar{x})^2=\frac{1}{n}\sum ({x_{i}}^{2}-2x_i\bar{x}+\bar{x}^2)=\bar{x^2}-\bar{x}^2=\frac{1}{n}\sum {x_{i}}^{2}-\bar{x}^2$
standard deviation for observed variables: ${s_{X}}^{2}=\sqrt{\frac{1}{n}\sum (x_i-\bar{x})^2}$
covariance for observed variables: ${s_{XY}}=\frac{1}{n}\sum (x_i-\bar{x})(y_i-\bar{y})=\bar{xy}-\bar{x}\bar{y}=\frac{1}{n}\sum x_iy_i-(\frac{1}{n}\sum x_i)(\frac{1}{n}\sum y_i)$
correlation for observed variables: ${r_{XY}}=\frac{s_{XY}}{s_{X}s_{Y}}=\frac{\frac{1}{n}\sum x_iy_i-(\frac{1}{n}\sum x_i)(\frac{1}{n}\sum y_i)}{\sqrt{\frac{1}{n}\sum (x_i-\bar{x})^2\cdot\frac{1}{n}\sum (y_i-\bar{y})^2}}=\frac{\sum (x_i-\bar{x})(y_i-\bar{y})}{\sqrt{\sum (x_i-\bar{x})^2\cdot\sum (y_i-\bar{y})^2}}=\frac{\sum x_iy_i-n\bar{x}\bar{y}}{({\sum x_{i}}^{2}-n\bar{x}^2)({\sum y_{i}}^{2}-n\bar{y}^2)}$
sample mean: $\bar{X}=\frac{1}{n}\sum X_i$
sample variance: ${S_{e}}^{2}=\frac{1}{n}\sum (X_i-\bar{X})^2$
standard error: $SE=\sqrt{\frac{1}{n}\sum (X_i-\bar{X})^2}$
corrected estimator for sample variance: $S^2=\frac{1}{n-1}\sum (X_i-\bar{X})^2$ with $S^2=\frac{n}{n-1}{S_{e}}^{2}$
$R^2$: $R^2=(r_{XY})^2$ or $R^2=\frac{ESS}{TSS}=\frac{\sum_{i=1}^{n}(\hat{y_i}-\bar{y})^2}{\sum_{i=1}^{n}(y_i-\bar{y})^2}\Rightarrow ESS=R^2\cdot TSS=(r_{XY})^2\cdot (\sum {y_{i}}^{2}-n\bar{y}^2)\Rightarrow RSS=TSS-ESS$
estimate of the variance of residuals: $SER=\sqrt{\frac{1}{n-2}\sum (e_i-\bar{e})^2}=\frac{RSS}{n-2}$


texts:
Can you share your recommendations for corporate finance if you have any?

A slightly more detailed version would be better:

For example, something like:

Advanced Undergrad: Varian's $\textit{Intermediate Microeconomics}$
Ph.D. 1st-year: MWG's $\textit{Microeconomic Theory}$

An example for corporate finance would be lke:

MBA-level:  ~
Corporate Finance Theory-specific:  ~
Ph.D. level: ~

Thanks!


texts: What are some of the good textbooks on Modern Monetary Theory and the Development of Monetary Theory?

texts: I am trying to study modern monetary theory for my research. Recommendations, please? Thank you!


texts: Why do yield spikes reflect badly on tech stocks

texts:
Yield spikes are a reflection of market equity valuation.
How I interpret this is that there’s real fear that some companies in the market won’t be able to pay their debt. Therefore, bonds trade cheap, hence spiking the yield.
Large Tech companies (FANGs) are not going to default on their debt.... so why does yield spikes impact their stock value?


texts:
I have the following Dynamical system for market impact function

$$p_{t+1}-p_t=a(d_t-s_t)$$

$$s_{t+1}-s_t=bp_ts_t-cs_t$$
$$d_t=y-rp_t$$

where $s_t$ is quantity supplied, $d_t$ is quantity demanded, $p_t$ is market price, $a,b,c,y,r>0$ are fixed.

What is the name of the model? And most importantly,how can I interpret these equations?

Thanks


texts: Short term and long term price elasticity of currencies

texts:
If I have 1% of the world supply of US dollars, and I decide to sell all of them to buy Euros, how much should I expect the exchange rate to change? Is there some kind of empirically determined price elasticity of demand that I could use to predict this? I've tried looking this up but I haven't been able to find it.

I'm also interested in the long run price elasticity of demand. Eg, how much should I expect my 1% USD sale to affect the price of USD in a year?


texts: Why can Iceland setup and maintain a single-payer system but Vermont can't?

texts:
Vermont apparently tried to setup a single-payer healthcare system, only to have various healthcare and pharmaceutical companies threaten to ruin them if they did so, at which point Vermont, a state not large enough to take them on, backed down.

Despite this, countries like Iceland have single-payer systems, and don't have to deal with things like nonsense pharmaceutical price gouging despite having only around half the population of Vermont, and six billion dollars less in GDP.

Why is it that Iceland can setup a single-payer system, but Vermont couldn't? What does Iceland have that Vermont doesn't? And how can these differences be generalized such to explain what the requirements are for a state, or country, or healthcare providing NGO to be able to run a single-payer system?


texts: Interpreting the q-intercept of the demand curve

texts:
Given a demand curve for a particular commodity, which I'll interpret as a function $p(q)$, the $p$-intercept can be interpreted as the choke price, i.e. the lowest price at which quantity demanded is 0.
Assuming the demand curve eventually intercepts the $q$-axis, the $q$-intercept can be interpreted, by definition, as the quantity demanded by consumers if the commodity were free. In other words, any production level greater than this quantity will necessarily result in excess due to the fact that consumers won't want more of the commodity even at a price of 0. Is there some term for this theoretical quantity? Something analogous (but opposed) to the notion of the choke price?
I'm a mathematician, and not an economist, so my economics vocabulary is fairly limited. I was reading about the notion of "market saturation" which seems related but not quite what I'm looking for. Thanks in advance!


texts:
In Advanced Microeconomic theory by Jehle and Reny there is a proof of the theorem which states the existence of utility function.

In order to prove the existence of a utility function $u(\mathbf{x})$ which represents binary relation $\succeq$ if it is complete, transitive, continuous, and strictly monotonic, it is suggested to consider a mapping

$u: \mathbb{R_+^n} \to \mathbb{R}$  such that $u(\mathbf{x})e\sim \mathbf{x}$ is satisfied, where $\mathbf{x}$ is a bundle, $u(\mathbf{x})$ is some number and $\mathbf{e}$ is a bundle which contains one of every good.

So first we need to show that there always exists such number $u(\mathbf{x})$.
To do this consider two sets:

$A \equiv \{t \geq 0 \mid t\mathbf{e} \succeq \mathbf{x}\}$

$B \equiv \{t \geq 0 \mid t\mathbf{e} \preceq \mathbf{x}\}$

if $t^* \in  A \cap B$, then $t^*\mathbf{e} \sim \mathbf{x}$, so we need to show that $A \cap B$ is nonempty.

The continuity of $\succeq$ implies that both A and B are closed in $\mathbb{R_+}$. By strict monotonicity, $t \in A$ implies $t' \in A,$ $\forall$  $ t'\geq t$. So $A=[\underline{t}, \infty)$.
Similarly $B=[0, \overline{t}]$

For any $t \geq 0$, completeness of $\succeq$ implies that either $t\mathbf{e} \succeq \mathbf{x}$ or $t\mathbf{e} \preceq \mathbf{x}$,
i.e., $t \in A \cup B$

$\mathbb{R_+} = A \cup B = [0, \overline{t}] \cup [\underline{t}, \infty)$.

So in order to $A \cap B$ be nonempty it should be that $\underline{t} \leq \overline{t}$.

But is it always like this? I can't see why the last inequality should hold always.


texts: Can lower working hours beat unemployment?

texts:
The common sense reasoning is downright simple: if X hours of works are needed per month, and Y people are available to work, give each person X/Y hours of work each month.

I understand that there are generic frictions that prevent this:

people not being qualified to do some jobs
people not wanting to do some jobs

And also specific frictions:

people not wanting to get a lower salary because of lower working hours.

Without being as extreme as in the introductory example: In a given sector, where there is a surplus of qualified people willing to do a specific job, and whose average salary is higher than the minimal salary necessary to live above the poverty threshold: It makes sense to reduce at the same time salaries and working hours, in order to allow more people to get a salary.

However, except from France which has reduced working time from 39 to 35 hours per months, such measures are not widespread, and seem scarcely considered.

Therefore one wonders whether such measures can actually work. If they do, why are they not more widespread? If they don't, what is the issue preventing them from being effective?


texts: Would GDP for a pure endowment economy be equal to zero?

texts:
(Am I correct?)

As far as I understand, a pure endowment economy means that good just appears in the country without any labor involved in producing them. Like maybe given country lives entirely from aid/gifts/tribute sent from abroad, literally producing nothing of its own (including services).

There are three ways that show that GDP=0

1.GDP stands for Gross Domestic Production. In a pure endowment economy there is no domestic production as such, thus GDP should be equal to zero.

2.We can try to calculate GDP using the income approach. This can result in negative GDP.

GDP=TNI+Sales taxes + Deprecation + NFFI

TNI=Wages + Rent + Interest + Profit

Wages=0 because nobody produces goods (including services!) inside the country.

Profit>=0. There is no profits domestically because nothing is produced domestically, but it's possible for local corporations to get profits aborad.

Interest>=0. Lending money is a service, but there are no local services in our economy, thus no lending to by local lenders to the citizens/firms of the country. But it's possible that local lenders lend their their money abroad.

Rent=0 because renting land is a local service and there are no local services (renting a building isn't an option because nobody builds anything in the country and it's not possible to sent a built building from abroad). So either nobody lends their land OR all lands are common property of all people living inside the country OR property rights over land don't exist as such

Thus TNI>=0. If TNI>0, then TNI+NFFI=0.

Sales Tax=0 because there is no State to collect taxes. And there is no State because any State provices services like the police, the army, the public healthcare, etc. The only way to not have all of these services, is to have NO entity with monopoly on violence, consequently making it impossible to collect taxes.

Deprecation=0 because businesses would have no capital to deprecate

NFFI=Income of foreigners earned here - Income our citizens earned abroad.

Income of foreigners earned here=0 because Wages,Rent,Interests,Profits=0 domestically (i.e. they can be >0 only if they get money from abroad)

Now it's possible that our citizens earned something abroad, in this case NFFI will become negative, but it will be compensated by equaly-sized positive TNI, consequently making the whole GDP equal to zero.

3.We can caclulate GDP using the expenditures approach.

GDP=Consumption+Investements+Government expenditures+Export-Import

Government expenditures=0 because there is no State.

Consumption=positive number because although there is nothing to buy on the national market it's possible to spend money on imported goods.

Investments=0 because there are no businesses and no new homes to be bought by households.

Export=0 because these are supposed to be goods produced in the country but sold aborad.

Import>0 if our citizens earn money abroad. In this case they can buy goods abroad too and then consume said goods inside the country. This coupled with positive "Consumption" will result in in GDP=0

P.S. From what I read I concluded that the number 1 is incorrect because production of endowment, although happens somehow magically, without any labor of our workers (for an example, it's produced out of the thin air by a magic lamp) is still DOMESTIC production.

The number 2 is incorrect because it's possible to sell endowments to other citizens and get positive profit as the result  (i.e. domestic profit>0).

The number 3 is incorrect because other citizens would buy (domestically!) endowments owned by other citizens/firms. Thus at the least Consumption would be >0 for domestic goods.


texts: Why does Denmark have such a huge disparity between its income and wealth Gini coefficients?

texts:
(After-transfer) income inequality and wealth inequality are obviously not the same thing, but I would intuitively expect that, all else equal, they would be reasonably well correlated across countries. Looking at the lists of countries ranked by income inequality and by wealth inequality, this appears to be more or less the case - with one glaring exception. As of the year 2000, Denmark's income Gini coefficient of 0.226 was the lowest listed in the OECD, and one of the lowest on the world (third-lowest, although that's as of 2011) - but its wealth Gini coefficient of 0.808 was the third-highest in the world.

Is there something unique about Denmark's economy that explains the gigantic disparity between its income and wealth inequality?


texts: Flooding the real estate market with luxury homes: will average prices rise or fall?

texts:
If every middle class single-family detached home in a sprawling metropolitan area like Los Angeles were each replaced with two luxury condos over a short period, would average real estate prices rise or fall? Would they go in one direction first and then the other direction later?

Or the opposite, if every two luxury homes were replaced by a single middle-class home occupying both parcels, would prices rise or fall?

I'm asking this because I'm wondering whether density or luxuriousness has the greatest effect on real estate prices. Knowing the answer to this would help to answer the question, "To solve the housing crisis, is it better to increase supply (even if it's luxury housing) or mandate affordable housing?"


texts: How reliable is ECB's financial derivatives data?

texts:
I am trying to use QSA financial derivatives data retrieved from the ECB's database (this is actually compiled by ECB and Eurostat).

To be more specific, the data is: Financial derivatives held as assets in the total economy. This is the link to it on ECB's website: https://sdw.ecb.europa.eu/browseSelection.do?type=series&q=QSA.Q.N.*.W0.S1.S1.N.A.LE.F7.T._Z.XDC._T.S.V.N._T&node=SEARCHRESULTS&ec=&oc=&rc=&cv=&pb=&dc=&df=

My question is: what's the quality of this data? Would you use it for empirical work? I know that it's particularly hard to measure financial derivatives, but there are some really strange things in this data.

For example, if I look at the derivatives-to-GDP ratio for the UK, this suddenly jumps from about 1% until 2003q4 to 350% in 2004q1 (and stays at similar levels thereafter). The same thing happens for some other countries, at different times. I really find it difficult to explain such huge changes.

Anyone has a good knowledge about this data and could please tell me more?

Thank you very much in advance.


texts: Have automation and technological advance been shown to have a positive impact on society and the economy or a negative one?

texts:
My friends and I, 2 of which are computer science majors think it is worse because is humans can't work and thus afford necessities, how will they survive?  The definition of automation: the use of largely automatic equipment in a system of manufacturing or other production process.
"unemployment due to the spread of automation"

It is to reduce human intervention mainly in order for tasks to more economically efficient and save on paying unions, benefits to employees, as well as human workers.  A business starts with one person let's say, an assembler.  He hires a few other people to assembly more work he's getting, and eventually has a whole factory. He is able to buy 2 robotic arms and use them to cut his human workforce in half, not needing let's say 20 guys out of 40 he had.  A few years later he buys two more robotic arms and the rest are laid off.  He now only needs a few men (3-4) for monitoring and repairs.  BUT once the CEO can buy technology to fix the robots, pretty much all left is observers, but then the CEO eventually just wakes up, hits a switch, and begins building.  He's rich, made his own job, made his living, he'll probably be fine.

HOWEVER, not everyone has the mindset or means to be an entrepreneur or innovator.  ALSO because the CEOs and owners invested and made their own business, how can they be hated in a fair way? They should have this right since the whole thing is their ownership and job, it just needed other people for a while.

ALSO, during this time, new jobs were made like the observers and robot repair people.  They were eventually automated out too.  This is being done for drivers, surgeons, pilots, military, security, construction, even cashiers are replaced by self check outs now.  They have tested a truck that drives itself, size of a delivery one for products. Drones are already delivering things.

Therefore, I can't see (and neither can others) how advancing technology to be more self-sufficient in itself is good when people will eventually no longer be able to find work and thus afford medical care, food, housing, clothing...from that, it would for the majority (not those who are stocked on riches and resources and were innovated enough to prepare themselves) cause economic collapse. Due to lack of taxpayers now and there be less flow of the economy anyways, a communist type system would unlikely happen so nobody starves or freezes.

Thoughts...does it have a better impact as many I've heard say, or all in all realistically, have a worse one (in the long run at the very least)?


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When the interest rate increases, I learned that money supply decreases because people put their currency back in banks in forms of assets and tend to save more, spend less.

However, money supply includes deposits as well as currency. So what I'm really curious about is whether a rise in interest rate actually decreases money supply.

Doesn't a rise in interest rate just decrease the ratio of currency in the economy and increase the ratio of deposits in the bank, the sum (deposits + currency) remaining the same? So shouldn't money supply technically stay the same?


texts: What will happen to the world economy if the price of oil/Coal/natural gas/electricity and all energy sources drops to lowest?

texts: Imagine if some country identifies a large resource of oil/coal/natural gas or other sources of energy that can be supplied to the entire world for the cheapest rate ever.(say for electricity 1 Cent/unit,petrol 1 cent/litre).How will it affect the world economy ?


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The quantity is limited to 300 but the monopoly quantity is equal to 400 and gives a monopoly price of 600. But if we plug the quantity of 300 into the demand function we get a price of 700.But I am confused.

Any help will be appreciated.Thank you.


texts: Where can I find County level income data for college graduates?

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Does anyone know where I can find data regarding the median income of college graduates by county in the US? Can't seem to find it searching through the census website.

The goal here is to obtain an opportunity cost basis to explore geographic wage differences in one field. I will be taking a ratio of field wage to this median income data. It would be more meaningful if I could find estimates of median income by educational attainment, rather than just general population data.


texts: What are the contents of "Recursive Macroeconomic Theory"

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I am trying to self-study macroeconomics. I just read parts of "Advanced Macroeconomics" by Romer, and found it a good, intuitive introduction to more advanced models (I have also read a more basic book on ISLM/Solow models and such).

Now I am being told the next step is Recursive Macroeconomic Theory. What are the contents of this book, i.e. what useful topics and methods does one learn that are not present in the Romer book?

Also, I am considering reading either RMT, or maybe something on Business cycles and the short run, which I haven't really read much of, the focus so far in the books has mainly been long-run economic growth... What is recommended to read first?