texts: Denominator for the Labor Force Participation By group

texts:
I want to check that I am using the correct definition for labor force participation rates by gender or income group. For instance, if we have the following:
1- Working age population of 800 people, with 400 men and 400 women
2- Total workforce of 500 individuals, with 300 men and 200 women.
Would the LFP rate for women be 200 in the workforce/800 total working age population?
Or 200 women in the workforce/ 400 working age women?
I have seen both used, but I assume only the second denominator is correct?


texts: Would someone be able to help me solve capital per capita in the steady state (check my work)

texts:
Question: Suppose $C_t=(1-s)Y_t$ where $s>\sigma$ as in the basic Solow model. Solve for capital per capita in the steady state.
$Y_t=K^{\alpha}_tL^{1-\alpha}_t$
$Y_t=C_t+I_t+G_t$
$K_{t+1}=I_t+(1-\delta)K_t$
$L_{t+1}=(1+n)L_t$
$G_t=\sigma Y_t$
Attempt:
$sy=sky^{\alpha}$: savings and investment per capita
$(n+d)k$: investment needed to keep capital per capita constant
n: population growth rate
d: depreciation
$\dot{k}= sky{\alpha}-(n+d)k=0$
Comment(s): I am unsure if this is even correct. My problem is that I didn’t even utilize the information given about consumption above. Any suggestions that could lead me down the right path?


texts:
Many governments try to decrease savings in the economy so that recessions do not occur. Does it make sense for savings and poverty to coexist though at significant scales?

Let's say a population was both in widespread poverty and they had savings. If they had unmet needs, they would spend their money on those needs. This would occur until either savings where expended or the needs where met.

If savings where bad and caused poverty, it would eliminate itself it seems. So either it is bad, but doesn't need to be discouraged since it eliminates itself, or is good and doesn't need to be discouraged.

I guess the problem could be if savings where uneven, but then

That doesn't mean savings are universally bad, just savings of the non-poor.
If there is a recession, people will have less money to buy things, and so things will need to be sold for less. This will encourage people with savings to spend.


texts: Am i correct here? #greenTaxes #priceMechanism #inefficientTax #DeadweightLoss

texts:
Now accoring to this article: https://www.telegraph.co.uk/news/2016/07/30/britain-banishes-plastic-bags-as-5p-tax-sees-usage-plummet-by-6/?fbclid=IwAR3avBXNeV1n3Emb8weHygZnCJdKo6xLIPWJB0J0gyHhXXh6FQf8MJKrznc

just by putting a 5p tax on plastic bags. The total number used plastic bags has fallen from approx 9 billion down to 1 billion.

Now based on that i wanted to see why this tax led to a distortion of the price mechanism, creating socially inefficient tax rates that also resulted in deadweight losses as seen in the uploaded figure. Is this correct done/understood?


texts: In a game with alternating moves and complete information, the Nash equilibrium cannot be a non-trivial mixed equilibrium?

texts:
Where I can find a simple proof for this fact?
For example, a trivial bimatrix game with alternating move has the following payoff matrix:
\begin{array}{|c|c|c|}
\hline
& 1 & 2 \\ \hline
U & (0,0)  & (0,0)\\ \hline
 L&   (0,0)& (0,0)\\ \hline
\end{array}
Then all of the pure and mixed strategies are trivially the equilibrium strategies.
I guess that, if the game structural is so complicated that it becomes impossible for the players to solve the game, then this complete information game becomes effectively like an incomplete information game. But I am not sure how to rigorously describe this.


texts: Order of Marginal Effects in Ordered Regression Model

texts:
I'm looking to validate my understanding of marginal effects on the probability of an ordered probit model. I don't understand how ME is calculated in respect to some alternatives.
For example if I have the following model:
$H_i = x_i\beta + \epsilon_i$
where $H_i$ takes on 3 categorical values like a happiness scale for example:
$$
H_i =
\begin{cases}
Happy & \text{if $H_i$ = 3}\\
Indifferent & \text{if $H_i$ = 2}\\
Unhappy & \text{if $H_i$ = 1}
\end{cases}
$$
and my error term is normally distributed N(0,1). The generic formula is:
$\frac{\partial pr(h_i=j)}{\partial X_i} = (F'(a_{j-1}-x'_i\beta)-F'(a_{j}-x'_i\beta)*\beta)$ where $\alpha_i$ refers to the threshold between each category calculated from maximum likelihood estimation.

So the MEs would be:

For the first group $\frac{\partial pr(h_i=1)}{\partial X_i} = (-\phi(a_{1}-x'_i\beta)*\beta)$

For the last group
$\frac{\partial pr(h_i=3)}{\partial X_i} = (\phi(a_{2}-x'_i\beta)-\phi(a_{3}-x'_i\beta)*\beta)$

Is this correct? The first group would only depend on itself since there is no previous group, while the last group will always depend on the second to last group?


texts:
Take the set of all vectors $x = (x_1, \cdots, x_n)$ that are
  solutions to $p_1x_1 + \cdots + p_nx_n = I > 0$. Show that this set
  has $n-1$ dimensions.

I have somehow managed to get myself stuck on the last part of this proof it seems. I am not using the fact that this set is a hyperplane and that hyperplanes are $n-1$ dimensions of the space they are in.

It is easy to show that $\{x_1, \cdots x_n\}$ spans the set we are considering, since $\sum p \cdot x$ is a linear combination and all that. However, $x_n$ can be expressed as a linear combination of $\{x_1 \cdots x_{n-1}\}$:

$$x_n = \frac{I - (p_1x_1 + \cdots p_{n-1}x_{n-1})}{p_n}$$

So we can remove $x_n$ from the span and the resulting set still spans. Now we want to show $\{x_1, \cdots n_{n-1}\}$ are linearly independent. That is, if $p_1x_1 + \cdots p_{n-1}x_{n-1} = 0$, all $p_i = 0$. If the set is spanning and linearly independent, then it is a basis. Since it would have $n-1$ vectors, it would be of dimension $n-1$ and we'd be done.

So I note that $p_1x_1 + \cdots + p_{n-1}x_{n-1} = I - p_nx_n$, and that $I > 0$.

So I assume there is a case where $I - p_nx_n = 0$ and where $I - p_nx_n \neq 0$. I am not sure how to finish off this proof, which makes me sad, because I think I'm just missing something obvious. Any assistance would be appreciated.


texts: Are there any examples for $u(x_1, x_2) = \max\{x_1, x_2\}$ in real word?

texts: I know how its graph looks like, and it's like when you want to choose between 2 inferior goods you choose the cheaper one so you can have more, but is there another examples?


texts: How does an import driven economy function?

texts: Can a country's economy,where everything is imported from other countries, solely depend on the income from its retail industry?


texts:
What is the difference between constant elasticity of substitution and elasticity of substitution? Are these formulas related? How are they different concepts? I just did a whole problem set involving these and got the right answers. But my thought process was all math. I don't feel like I understand them economically. And that's what I want explained.

By CES, I mean
$$U(x,y) = A \left(\alpha x^{-\rho} + (1-\alpha) y^{-\rho}\right)^{-\frac{1}{\rho}}$$

By ES, I mean

$$\sigma = \frac{\mathrm{d}\log \left(\frac{x}{y}\right)}{\mathrm{d}\log \left(\frac{U_y}{U_x}\right)}$$


texts: Effect of positive inflation shock on the exchange rate

texts: How does a positive inflation shock affect the exchange rate? Does the exchange rate appreciate or depreciate? I am looking for an intuitive explanation.


texts: Can resource be considered scarce if its supply is limited, while quantity of the resource is practically unlimited?

texts:
Let's consider energy of our Sun for an example. The Sun will be able to give us lots of energy for millions of years (and even its annual energy output is enormous), it's practically unlimited energy. We would have practically unlimited supply of solar energy if we built Dyson sphere. Yet there is limited amount of solar energy that we can collect, save and distribute due to our limited technologies, limited resources and other considerations (like we can't just replace all forests with solar panels, it will be huge blow to our ecology). We can't increase supply of solar energy to satisfy global total demand for energy.

Given this situation, can we say that in our current situation solar energy is a scarce resource? And if yes, then can we generalize this conclusion from this particular example to any case where we have limited supply of unlimited resource?

UPDATE: from comments:"you don’t need any other price than zero for this check, you need to check if at price 0 D>S". Now it seems to make sense.


texts:
≳ is a preference ordering if it is reflexive , transitive and complete.
In Mathematics relations are said to be in a equivalence relation if they are
reflexive, symmetric and transitive.

Can we call preference ordering a equivalence relation?
And if so what is the significance of preference relation being a equivalence relation in further studies of microeconomics.?


texts: Analytical approach to estimate equilibrium price for Real Estate Property

texts:
I am looking to calculate the equilibrium price, i.e an optimal price that I can set without affecting demand and maximize revenue.

I've gathered historical data: occupancy rates, asking rents for different property types by submarket / market and have a bunch of other data including local economic variables, new construction, location characteristics etc. Here's how I am thinking about estimating the demand function -

First predict demand, occupancy rates using Regression with fixed effects and historical prices for a particular property type in a given submarket. The training data for this is last 5+ years of historical data.

Approx. Model specification:

Dp = bo + b1*(Econ) + b2*Supply + b3*Loc + b4*Price t + b5*Price t-1 + b6*Price t-2

With this, I can get an estimate of how much price can change without significantly affecting quantity demanded. The assumption here is all else being equal. However, supply/vacancies changes.

So, my question is how would you model this? Are there any other analytical/ML approaches to model this and calculate equilibrium price?


texts: What is the financial incentive for physicians and hospitals to join an Accountable Care Organization (ACO)?

texts:
Accountable Care Organizations were created by the Affordable Care Act in 2011 in order to improve quality of care and reduce costs for patients and are part of a change from fee-for-service payments towards value-based payments in healthcare.

As I understand it, groups of doctors and hospitals participating in an ACO are encouraged to meet health outcome targets for their patients. ACOs that reduce unnecessary procedures, visits and hospital stays, are rewarded with a share of the savings.

According to the National Association of ACOs "As of January 2019, there are 538 Medicare ACOs serving more than 12.3 million beneficiaries with hundreds more commercial and Medicaid ACOs serving millions of additional patients."

So far, so good. However if a non-ACO provider is bringing in significantly more revenue by encouraging unnecessary procedures, visits and hospital stays, it's not clear to me why they would voluntarily join an ACO to be "rewarded" with a percentage of their lost revenue?! Are there other incentives I'm not aware of?


texts: Unitary Elasticity Of Demand Question (PED=1)

texts:
So I was having a bit of trouble reasoning with the answer for this particular PED question. It goes like this:

PED=1, Quantity Demanded=4,000 units when Price=$12

The question was:

Find the price when Quantity Demanded=20,000 units

So I tried the easy way to do this which was to use the price in which the Total Revenue remained the same, and I got the answer Final Price= $2.4.

My problem was that I tried another method and I am not getting the answer and I want to know why .

So PED= % Change in QD/ % Change in Price

We can see that the increase in Quantity Demanded is 400%. Shouldn't it stand to reason that the  decrease in Price is also 400% (I know this is impossible because a price can't fall by more than what it is at the moment) but isn't the theory that the % fall in price will equal to and be offset by the % increase in QD, resulting in the revenue remaining the same?

I'm sorry if this question was unnecessarily long or even confusing, it's a bit difficult to understand my own thoughts so writing them out in paragraphs helps me understand why I'm asking this question in the first place ;).


texts: It states in my textbook that as interest rates are lowered it says lenders are the ones who gain from the decrease in interest rates. But isnt this not true? As lower interest rates imply the amount you net from lending decreases as interest decreases?


texts: What's the (economical) advantage for a company by paying an employee severance payment short before retirement

texts:
Given following situation
A Company has an employee (Bob) who will retire in 3 years. The company decides to save costs and therefore does downsizing. They offer Bob an severance payment in the amount of 3 annual salaries, if he leaves the company.
  Question
Assuming that Bob is a valuable employee who does a good job - how does it make sense (for a company) to let him go and give him the same amount of money as when he still worked for the company?

If relevant: we assume Bob lives in Germany.


texts: Did I calculate maximum price of machine correctly?

texts:
Problem:

A firm wants to buy a machine for its factory. It will work for two years. During the first year it will yield 240 thousand roubles and during the second year it will yield 200 thousands roubles. We need to caclulate maximum price that the firm will agree to pay for the machine. And one important thing: instead of investing money in the machine the firm can put said money in a bank, interest rate per year is 20%.

I concluded that the maximum price for machine is about 306 thousand roubles. My reasoning was following: If the firm will make the investment it will get 440 thousands of roubles in total (240+200=440). If instead of buying the machine the firm will put 306 thousand roubles in its bank account, then after 2 years it will get about 440 thousands of roubles. Such price makes the firm indifferent between said two options. But if the price will be higher than 306 thousand roubles, then it will make more sense to put the money in a bank account.

I got about 306 thousand of roubles by using this formula:

Where $ F_v $ is total sum of money in the future, $i$ is interest rate, $t$ is number of years and $P_v$ is initial sum of money that we need to put in our bank account in order to yield $F_v$ after $t$ years.

Therefore:

But solution in my textbook says that maximum price is 338.9 thousands roubles and that I must calculate it by using this formula:

Where $π_t$ is revenue for given year and $i$ supposedly means something like "rate of inflation" (i.e. how fast money lose their value)

Thus:

But such solution doesn't make sense to me. Firstly, here $i$ means different thing, it's rate of devaluation of money, not interest rate. Secondly, with price equal to 338.9 thousand roubles it's clearly more profitable to put the money in a bank, because we will get about 488 thousand roubles after two years, instead of 440 thousand roubles.

UPDATE 01:

If we take all revenue that the machine yields at the end of the first year and put them in bank, then our total revenue after two years will be 488 thousand roubles instead of 440 thousand roubles. Considering this, now I agree that 338.9 thousand roubles is maximum price.

But I still don't see why we need NPV to calculate this and why $i$ must mean inflation, when it means annual percentage rate


texts:
Is there any book/papers that I can refer to the proof (derivation) of the CES utility function?
Or if anyone could help me with the derivation, I will be so much grateful to you.


texts: What is the difference between imperfect substitutes and complements in a production function?

texts:
According to the following definition:

q-complements/substitutes (q is for quantity).
Input x and y are complements if the marginal product of x is increasing in quantity of y.
Input x and y are substitutes if the marginal product of x is decreasing in quantity of y.

Complements are sometimes called "imperfect substitute". See, for instance,this paper (Autor et al. 2003), page 1286-1287.


texts: How call a function outside of .Mod file of Dynare? (using Command Prompt of MATLAB)

texts: How we can call a function (for example dynare_sensitivity();) in command prompt of MATLAB not in .Mod file of Dynare? I can see function in Command Prompt but How can i use it?


texts: Is there a good database comparing the cost of public transport? I found this one and this one but they cite no sources so have no idea how they were constructed. Also, it is for a given period. Ideally the database should have more years. I've searched in OECD and world bank without success. Help please! :)


texts: How to achieve the best outcome by a single statement in this game?

texts:
This game is taken from Schelling's Game Theory: How to Make Decisions by R.V. Dodge, in which contenders practice brinksmanship to their own advantages. It goes as follows:

Anderson, Barnes, and Cooper are to fight a gun duel. They will stand close to one another, so that each can kill one of the others in one shot or deliberately miss. The first to fire will be chosen at random, and they will rotate in the order Anderson, Barnes, and Cooper, each firing one shot at a time.

If there is more than one survivor after a number of rounds, one of the contenders will be chosen at random and forced to kill one of the others, and this will be repeated if there is still more than one alive after a few more rounds.

Before the duel starts, Anderson may make any statement, followed by a statement from Barnes, and finally one from Cooper. They will adhere to the following rules:

Statements are irrevocable. A contender may not act to contradict his statement.
He will act in his own best interest when it does not conflict with Rule One.
He will act randomly when it does not conflict with Rules One and Two.

There are referees to ensure that the rules are followed. If a contender commits himself to a mixed strategy (for example, to miss with a probability of 1/3), the probability will be determined objectively (by tossing dice, etc.).

Q1: What statement will Anderson make? What's his best strategy and his probability of surviving?

Q2: If three contenders are to make their statements in the order of ACB, what would be the best statement for Anderson?

Q3: If there're more than three contenders, does this game become simpler or more difficult? Can we say anything about the $N$ contenders case for $N\gt 3$?

Notice that if no one makes any statement, no one will shoot, and everyone has a surviving chance of 1/3. If only Anderson is allowed to make a statement, he can guarantee near certain survival by making this statement to B and C: "If you don't kill each other at your first opportunities, I will kill the first of you who fail to do so at my first opportunity; otherwise, I'll shoot at the survivor of you with 1% chance of missing."

In the book, a suggested best solution for Q1 is for A to say:"If B does not commit to unconditionally shooting C, I will shoot him." The argument is that B has no choice but to accept, because refusing A's proposal would result in certain death for B. But that is clearly erroneous! Because B can say: "If C doesn't promise to kill A at his first opportunity, I will kill C at mine; if C does, I will kill A at my first opportunity and shoot at C with 1% chance of missing if he kills A first." By refusing B's proposal C has 2/3 chance to survive (1/3 for A shooting first and 1/3 for C shooting first); by accepting he has 2/3+0.33% chance (1/3 for A shooting first, 1/3 for B shooting first and 0.33% for C shooting first). So C will accept. Then A is doomed, bound by his own inconvenient statement.


texts: Rosen's uniqueness theorem: Why is the Jacobian Square?

texts: Rosen's paper (J. B. Rosen. Existence and uniqueness of equilibrium points for concave n-person games. Econometrica, 33(3):520–534, 1965) presents a condition for the uniqueness of the Nash Equilibrium in $n$ players game. The setup is described in simple details by this other economics exchange post. My curiosity is why is the Jacobian of $g(\mathbf{s},\mathbf{z})$, where $g(\mathbf{s},\mathbf{z})$ is the pseudogradient of the function $\sigma$, a square matrix?  If $s \in \mathbb{R}^m$ and there are $n$ players, it seems to me that the matrix would be $n \times m$ instead of $m \times m$. I have left out many of the details of the problem set up as they are covered in the other post; however, I can restate the set up or provide additional information if necessary.


texts:
Must admit it has been many years since I have done advanced calculations or anything remotely like it, so please bear with me.
I have problem that I hope to get some help with. Say I have below dataset:

|   Quarter |   Exposure |   Loss Given   |   Probability of  |   Estimated Loss  |
|           |            |   Default (%)  |   Default (%)     |                   |
|-----------|------------|----------------|-------------------|-------------------|
|       Q1  |   100,000  |          3.0%  |             5.0%  |            150.0  |
|       Q2  |   150,000  |          2.8%  |             5.5%  |            231.0  |

Where Estimated Loss = Exposure x Loss Given Default x Probability of Default.

My problem now is, I would like to be able to explain the difference between Estimated Loss in Q2 and Q1, by explaining how much of the delta is due to the change in each parameter, or how much each parameter contributes of the change - if that makes sense?

Ideally I would like to be able to say something like below:

231 - 150 = 81, of which:
+76 due to increase in Exposure
-10 due to decrease in Loss Given Default
+15 due to increase in Probability of Default

The reason behind showing it like this, is to make it more "understandable" for the reader who is not aware of the mechanics behind the numbers.

My initial thinking was to see what effect it had on Estimated Loss by changing only one parameter at a time; but I will miss some multiplier-effect, since the parameters are not independent.

Also if done this way - the order of how I show the change affects the outcome. Say I first change Exposure and see the result, next up LGD and lastly PD - then, because they are dependent, the effect is larger in PD than in Exposure - and other way around if I change the order. That was when I realised that I should probably have brushed up on my math skills.

1) Would it even be possible/make sense to explain the delta as above, where it can be determined how much each paramter contributes of the delta?

2) If it is possible; I assume that I need to do some sort of Partial Differential equation?

Thanks for you help :-)


texts: What effect would raising reserve requirements while printing money have?

texts:
It is generally accepted, that printing money will be inflationary, as it increases the money supply without a corresponding real growth of the economy.

At the same time, if the central bank increases reserve requirements (or the official cash rate/bank rate) this decreases the money supply.

So the question is, if a government, perhaps in a time of need, both prints money in order to carry out some project, and also increases reserve requirements/bank rate in order to conteract the inflationary effect, what are the likely follow on economic effects?


texts: The Savage sure thing principle and Subjective utility representation

texts:
I have tried reading and understanding Savage's proof of the subjective utility representation, it is too complicated. Is anyone aware of a shorter/more elegant proof of this?
It is not a problem if we assume a finite prices set.

The original is in Savage, L.J. 1954. The Foundations of Statistics. New York: John
   Wiley and Sons.

A good summary can be found at
http://www.econ2.jhu.edu/people/Karni/savageseu.pdf.

The Savage proof is known to be very elaborate, and long. It uses the sure thing principle as its main axiom. I was wondering if there is a more "modern" proof, that is both elegant and shorter. Or a nice challenge would be to try to prove collaboratively using some modern mathematics, like mixture spaces, (I am aware of Anscombe-Aumann).


texts: How is an spontaneous currency changing phenomenon called?

texts:
On November 2019 I went back to Venezuela, and the biggest shock for me was that people started trading goods using US Dollars. This isn't "legal", but it has become so common that I hardly ever had to have the official currency "Bolivar" with me during the three week period that I was there. I was told that trading using US Dollars became mainstream during the blackout period on which you had no access to any electronic means to pay and given that Bolivares in cash were scarce, people began using US Dollars as currency. Al tough both are accepted.

Anyway the problem goes much much deeper. But I wanted to know how is this called and if any other country has ever gone through a process similar to this one before?


texts: Leontief preferences and 2nd welfare theorem

texts: Does the 2nd welfare theorem hold with Leontief preferences?  If not, which of the assumptions does not hold?


texts:
I am trying to decipher certain abbreviations related to balance of payments. They are strange, and i have to admit i have no idea what did they mean furthermore i was not able to find anything relevant via google and also i am not able to find them in my macroeconomics textbook. So the abbreviations are:

rb, ka (capital account), rf, eo, bop (Balance of payments).

Those i know are in brackets. Could you help me find the meaning of those abbreviations?

EDIT: The question was the following given:
$rb=-1491, ka=2280, rf=-1551, rb+ka+eo=-3282$ calculate $bop$ and $eo$

answer is:
$eo=-4071$ and $bop=-1731$
and one more thing:
$rb+ka+eo-rf=bop$ and $rb+ka+eo-ka-rb=eo$ that is all i know.


texts: When in the history the governments issued non-cash money first?

texts:
I understand that the Federal Reserve is issuing money in the form of deposits. Those deposits "are not cash but they are money: they can be used for payment (at which point they become somebody else's deposit) and they can be converted into cash on demand"

And then, my question is: when the history of the USA the authorities (government or FED or something else) issued such deposits instead of cash, for the first time? I have the same question for Europe.


texts:
Bank of England (2014):

Money can also be destroyed through the issuance of long-term debt and equity instruments by banks.

How is money destroyed when banks issue debt?
Say Bank X issues a £100 10-year bond that Person Y buys with £100 cash. Then

X has assets +£100 (cash) and liabilities +£100 (10-year bond); and
Y has assets +£100 (10-year bond) and assets -£100 (cash).

How is any money destroyed?


texts: Difference-in-differences in 2SLS regression

texts:
Usually when we do a difference-in-differences estimation, we do it in a OLS reduced form as follows:
$$
Y_{it}=\alpha After_t+\gamma Treatment_i+\delta After*Treatment_{i,t}+X_{it}\beta+\epsilon_{i,t}
$$
However, I was wondering, if the $Treatment$ group is endogenous (e.g. self-selected), but we can define an "eligible" group for the treatment, whether it would be more precise to estimate a diff-in-diff in a OLS/2SLS form as:
$$
Treatment_{i,t}=constant+\alpha After_t+\gamma Eligible_i+\delta After*Eligible_{i,t}+\epsilon_{i,t}
$$and get $\hat{Treatment_{i,t}}$, then

$$
Y_{i,t}=X_{it}\beta+\delta\hat{Treatment_{i,t}}+\epsilon_{i,t}
$$

How should we understand the diff-in-diff in a OLS/2SLS form? Are there any paper using this particular identification strategy that I could take a look?

Thank you very much in advance!


texts: Deriving the golden-rule savings rate in a Solow Model

texts:
Consider an economy described by the per worker production function function:
 $$y = f(k) = 2k^\frac{1}{2}$$   and a depreciation rate $δ$ of $.05, 5%$.

Considering what we know to be true of the golden rule level of capital, find the golden rule level of capital $k_{gold}$ and output $y_{gold}$ using the above information.

Suppose there is no population growth rate $n = 0$.  Given the Solow model equation $(\Delta k = sf(k) – \delta k)$, and the answers for $k^*$ and $y^*$ you got in part A, what savings rate must this country have to put us at the golden rule level of capital?

Here is what I did:

  In part A, I took the derivatives of the depreciation rate, and the
  per worker production function, and got that $K =.05$ just by the
  simple power rule. To find the output I plugged $K=.05$ back into the
  per worker production function to get $2(.05)^{1/2}$ and came up with
  an output of $.447$

  Part B: Since the equation I need now is $sf(k) = \delta k$ which
  using what I know, $s\times.447 =.05 \times .05$ Solving for $s$ I get
  that the savings rate is $0.556$ %.

However, this is not correct. Please help me find the correct solution method and correct solution.


texts:
I have a function f(x) in which there is log function

$f(x)=log(1+ax)-bxg(x)$

I need a discount function g(x) with which the function f(x) is concave and the value of x is not too complex.

I tried $g(x)=\frac{1}{1+cx}$ but it becomes too complex (quadratic).

Similarly I tried $g(x)=exp(cx)$ but that too turns out to be a lambert function.

Any guesses for a simple discount function g(x).


texts: How did the silver standard "insulate" China from the beginning of the Great Depression (1929-1931)

texts:
There is a segment from this article that I want to unpack:

The Great Depression was a global crisis—almost. Every significant
economy was devastated, with one notable exception: China. The reason
was simple. In 1929, the US and every other major nation pegged their
currencies to gold. As the economic historian Barry Eichengreen has
described, adherence to this standard punished countries by imposing
“golden fetters" that led to crippling deflation. The fixed exchange
rates of the gold standard helped transmit the monetary shocks around
the world.

Clearly, the silver standard didn't help China in the later years, but I'm keen to understand how China's economy fared so well in these specific years: 1929-1931. When I read the above, I'm not exactly sure what the logic is. My best hunches were:

Price of gold increased faster than the price of silver because gold is more of a "haven" asset, and thus providing China with more competitive exports
Or, the peg to silver itself wasn't the main factor, but merely being pegged to something different than the other countries which helped China avoid the transmission effects

But after looking at historical prices of both metals leading up to and following the Great Depression, I saw divergence, but not dramatic divergence. So my intuition has been depleted.
Question
How did the Silver Standard insulate China from the broader economic contractions?


texts: How to graph a monopoly that does not exhibit the properties of a contestable market?

texts:
This question is not a homework question. I am taking a course in industrial organization, and the textbook/professor have given an illustration of a monopoly that is a contestable market. However, I am having trouble seeing, graphically, how an illustration of a non-contestable monopolistic market would look.

The properties of contestable markets are:

(i) Free entry, (ii) Absolute entry, (iii) No sunk costs with entry.

I have included the image used in both the textbook, and by the professor for contrasting purposes. One other question, if LRAC is decreasing as output increases, would that mean that the monopolist is facing economies of scale, which would cause there to be a barrier for the entrant?

Thank you in advance!


texts:
How does one solve utility maximization of perfect substitutes using Lagrangian function?
Consider the problem
$$\max_{x,y} ax +by  $$
subject to the constraint that
$$px + qy \leq I$$
where $a,b,p,q,I>0$.
Note problem statement are subject to the standard implicit assumptions that consumption cannot be negative.


texts: on the FRED website where do i find definitions of the variables they give charts of?

texts:
eg M3?
how can we see precisely how it is defined, measured?

https://fred.stlouisfed.org/series/MABMM301USM189S?fbclid=IwAR1lwaCbKUX16L1meOk6iZvloYOW0F7pIjmq9I4sb5VfvhhLhj8lsVTlpxg


texts:
I'm trying to get a measure of market power in the US. Here's what I'd be interested in, ranked from best (what I'm really after) to worst (stuff that kind of hints at my measure, but isn't really it.

Price distributions of similar goods in the US, by county/state
Average markups for different goods, by county/state
Average [other characteristic that correlates with higher firm market power], by county/state

Importantly, I'm after price distributions of goods consumed in state A, not produced in state A.

I guess I could use the Nielson data set to get some proxy of price distributions, but I don't think that's the strength of the data set. What else is there?


texts: Asking for guidance regarding seperating sample to compare

texts:
In international studies, researchers normally seperate the sample based on some indexes. For example, based on time-invariant index like cultural index (developed by Hosfede) or time variant index like World Government Index (WGI) which changed every year for each country.
It is quite evident when seperating the sample based on the time-invariant index, is there any guidance to seperate the sample based on the time-variant index?


texts: A feasible rational payoff that is not an equilibrium payoff in the repeated game

texts:
The textbook I am currently reading claims that, in an infinitely-repeated game with discount, there might be a payoff vector which is feasible and individually-rational, but it is not an equilibrium payoff vector in the repeated game. The example is the following basic game for three players:

     L       R
T  0,2,5    0,0,0
M  0,1,0    2,0,5
B  1,1,0    1,1,0

The third player is a dummy player with only one possible action.

In this game:

The minimax values of the players are 1,1,0.
The payoff vector 1,1,5 is both individually-rational and feasible (e.g. by mixing TL and MR with equal frequencies).

The book claims that the only payoff vector in equilibrium is 1,1,0! Why?

Let $E$ be some equilibrium in the repeated game. The payoffs of the row and column players in $E$ must be 1, because:

They must be at least 1 because these are the minimax values;
They must be at most 1 because the sum of utilities of these players in every outcome is at most 2.

In the TR and ML cells, the sum of utilities of the row and column players is less than 2; hence, these cells are not played in equilibrium at all.

So in equilibrium, the only cells that may be played with positive frequency are: TL, MR, BL, BR.

Now, the authors claim that TL and MR are also not played at all in equilibrium. From this they conclude that the payoff of the dummy player is 0. I didn't understand this part. Is it true that TL and MR are never played in equilibrium? Why?


texts: Why are different currencies able to purchase different amounts?

texts:
I am baffled by this for so many years! Kindly, explain this in layman's terms (i.e. to a guy who never studied economics at a university):

  I  can purchase one dozen of eggs for €3.52 in Frankfurt, Germany but for ₹66 in New Delhi, India.

If I am living in India, I am in double trouble:

Why is the price of goods higher in India than that of Germany with reference to people's income level?
An employer is paying me such an amount of money (say,₹10,000 ≈ USD 152.52) which apparently looks larger, but in actuality, I am earning much lesser than that of a German guy (say, €1000 ≈ USD1173.96). Why am I earning less?

So, what factors make this difference?


texts: Why Need a Numeraire Good in Dynamic Analysis

texts:
Often in macro pure exchange economy models (sequential trading), authors make the initial period good price $P_0=1$ asserting this set-up is to make the consumption at period $0$ the numeraire.

But I don't see any detailed explanation or justification for doing this.

Just to add some background story:
The usual set-up is that agents are endowed with some units of goods, say oranges. So the unit of their consumptions is oranges. $P_t$ often the price, at $t=0$, of an orange consumption promised for delivery in period $t$. Why make $P_0=1$?


texts: Why is it a problem if China starts "dumping" US Treasuries? What does it mean to be dumping?

texts: China has 1.2 trillion dollars worth of us treasuries. Why would it be a problem for them to get rid of all of them? Why would that destabilize the US economy?


texts: Multivariate cointegration methods in Econometrics

texts:
I've studied a number of cointegration methods in the past few months. It seems, Johansen's multivariate VAR approach to cointegration is the most commonly used multivariate cointegration technique. Most packages appear to have in-built functions to run "Johansen cointegration analysis".

I was wondering if there are other multivariate cointegration methods in the literature though less known and are not available in let's say Eviews, Stata, RATs etc. but can be programmed.


texts: Where can I find data on bilateral trade?

texts:
Where can I find data on bilateral trade between countries in the world over time?
I heard that only International Trade Center has access to this data, but I guess there's a public source. I tried but didn't succeed, for example this one.

Many thanks.


texts: How to enhance one's comprehension of the descriptive meaning of formal economic statements?

texts:
I found that, though most of the time the math technical parts of economics is not a problem for me, I am somehow troubled with extracting the descriptive meaning of formally stated economic statements. I seem to not have the intuition developed enough to read the economic meaning out of formal conditions. This is manifested in macroeconomics. For example, in the class of OLG models, the budget constraints may take many different forms according as scenario (with money, social security,...). Many times, after I saw how simple the economic meaning a sentence conveys either by lecturer in a class or author in a book, I asked myself how I did not see this.
On the other hand, microeconomics is much more clearer to me.

So my question is how to develop a proper intuition to extract the descriptive meaning of any given economic formal relation.


texts: Making sure the p-values of my OLS estimates are correct

texts:
I have learned the basics of the Classical Linear Regression Model and also various diagnostic tests to check if the assumptions of the CLRM are met, such as homoskedadticity, absence of near perfect multicollinearity, normality of residuals etc.
I wanted to know if it is possible to have an exhaustive set of things I need to test to be reasonably confident about the p-values I get, both overall and for each specific regressor's coefficient (in a multiple regression with cross sectional data).
For example, what are the things that a researcher would test to make sure that the p-values are technically correct (or at least acceptable) and publishable in an academic journal (not talking about the usefulness of the topic or whether there is causality etc, just the statistical inference, if that is acceptable or not)? Different textbooks/ lectures I have seen have put differing amounts of emphasis on different things. I wanted to know what would a professional researcher do?


texts:
I am interested in understanding how to mathematically model market interaction to optimize pricing strategy. In my model I have two kinds of knowledge: the market's order book and the price/volume curve. So, I know for any given price how many widgets will change hands at that price on a given day. Note that the price/volume curve changes over time and I cannot predict it into the future, I only know what it is historically.

So, my problem is, given I have a certain number of widgets I would like to sell I have different possibilities: I could sell them immediately at the buy price, or I could put them up for sale at a higher sell price and hope someone buys them. If I put them up for sale, then I need to decide what I should price them at. If I make my sell order the lowest order, then that can have consequences. For example, lets say widgets are buying at 850 each and selling for 900. So, I list my widgets for sale at 885. Other sellers could try to undercut me, modifying their orders to be lower than 885. Another effect is that buyers could lower their buy price. When the guy buying at 850 sees my 885, he could decide the price is coming down, so he might change his buy order to 840. Now, if I change my mind and sell my widgets immediately I will only get 840 for them each, but if I had sold at first I would have made 850. So, I will have lost both time and money.

Given the information I have (order book and price/volume curve), how can I model the situation mathematically to optimize my total profit? Are there well-known theories or models that attempt to solve this problem?


texts: First Reference Leontief/Perfect Complements

texts:
I googled a lot and I'm still to find:

1. In which paper/book/reference do Leontief [production] functions make their first appearance?

Similarly

2. In which paper/book/reference do perfect complements/Leontief utilities make their first appearance?


texts: Real world example of using difference quotient vs. derivative

texts: When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable?  Real world examples seem to be lacking in textbooks on basic mathematical economics.


texts: How can you tell if any given preference structure is continuous or not?

texts: From a given preference structure (not the utility function), how can one tell if it satisfies the continuity axiom of preferences?


texts:
So I have the Euler condition written as follows: $$\frac{1}{k_t^a-k_{t+1}}=\frac{a\beta k_{t+1}^{a-1}}{k_{t+1}^a-k_{t+2}}$$
and it says that $k_{t+1}$ takes the form $gk_t^a$, where g is an unknown to be determined. I know the result is $k_{t+1}=a\beta k_t^a$, but don't know how the derivation goes to reach this result.
From the hint, I got that $$\frac{k_{t+2}-k_{t+1}^a}{k_{t+1}-k_t^a}=a\beta k_{t+1}^{a-1}$$
So I guess the LHS is g=$a\beta k_{t+1}^{a-1}$?
Am I doing it right or not?


texts: Areas of Europe with more women than men have higher GDP and lower unemployment. Why might this be?

texts:
Using Eurostat data I've found that regions of Europe with more women than men (i.e. female biased sex ratio) have higher GDP and lower unemployment than areas with male biased sex ratios. any idea why this might be?
Cheers


texts: Given a Utility function, U(x,y), why is multiplying U(x,y) * x not a monotonic transformation?

texts: If $x$, is a commodity and it is s.t. $x \geq 0$ (it is always nonnegative) how will multiplying it times a utility function $U(x,y)$ NOT yield a simple monotonic transformation?


texts: How much money is wire transferred every year worldwide? Estimates are fine.


texts: Negotiations under expected utility maximization

texts:
A buyer is negotiating with a used car salesperson. The value of the car to the seller is uniformly distributed between 0 and 5000. Value to the buyer is 50 percent more than that of the seller (i.e. 1.5 times of the seller's). Both are rik neutral, neither party has a private signal, and all of the previous is common knowledge.
One party will offer a price. The other party can accept the offer, in which case the buyer will pay the price to the salesperson in exchange for the car, or make a counteroffer. The counteroffer is take-it-or-leave-it; the first party can either accept the counteroffer, or there is no deal.
If both parties are expected utility maximizers, what would you expect to happen when the salesperson
makes the first offer? What about when the buyer makes the first offer? If you were one of the parties to the negotiation, would you prefer to make the first move, or the second?
My Solution:
The expected utility of the car for the seller is $\frac{(0+5000)}{2} = 2500$ and the expected utility of the buyer is $1.5 \times \frac{(0+5000)}{2} = 3750$.
Seller makes the 1st offer: The seller would ask a price greater than or equal to 2500. Trade occurs only if the offer is less than or equal to 3750. The seller wants to get the maximum payoff so he will ask for the maximum price which is equal to the expected value of the buyer i.e. 3750. The buyer than makes a counteroffer equal to the expected value of the seller i.e. 2500. Seller accepts that offer as it is within his domain of acceptance.
Buyer makes the 1st offer: The buyer would give a price less than or equal to 3750. Trade occurs only if the offer is greater than or equal to 2500. The buyer wants to get the maximum payoff so he will ask for the minimum price which is equal to the expected value of the seller i.e. 2500. The seller then makes a counteroffer equal to the expected value of the buyer i.e. 3750. Buyer accepts that offer as it is within his domain of acceptance.
What would I do: I would want to move second as that would allow me to give a take-it-orleave-it offer which provides me a higher bargaining power.
I would like your valuable feedback on my solution of the question.


texts: What makes a factor valid in a factor pricing model of assets?

texts: This question is related to another question here. The question linked to asks for examples of factors commonly used in ICAPM models (intertemporal capital asset pricing model). What I want to know here is this: what is underlying principle that makes a factor a valid factor in factor models such as the CAPM, ICAPM, or APT?


texts: Omited Variable Bias and descriptive statements

texts:
Let's say $y=c+ax+by+error$
 (where the error term fulfills all the assumptions) descibes reality. If we have $z=vx$ than $y=h+max+s$ will also describe reality. When reading about OVB I have seen statemets like "if the true modell is $y=c+ax+by+error$
 and x and z are correlated than regressing only on x will overestimate(or underestimate) the true coefficient of .” But this seems to be trying to establish causality? If we are only talking about descriptive models than there could be many different correct coefficients for
depending on the variables included in the model couldn't there?


texts: Trying to understand ceiling in supply and demand on picture

texts:
I am having one problem, which I do not understand. Let's assume the government applies ceiling price below the equilibrium price. I colored it red in my graphs.

Of course, supply would decrease, there would be a shortage. But why does everyone plot the supplier and consumer surplus as it is in the left picture?

Let's think about it. If the government says the new price is N dollars for something, this means that there are a lot more people who are willing to pay the N price. I just don't understand why we always plot it like those who are willing to pay the most will get it, since new N dollar price is now acceptable for many more people and they would grab for an item as fast as those who are willing to pay the most. What I am trying to say is, if there is a ceiling price for something, it's not affordable only for those who are willing to pay the most but by everyone who is willing to pay above the threshold of ceiling price. But I see no one plotting the model as I did on the right side of the picture. Could you please explain to me why?


texts: What's the use of '% to GDP' type of variables?

texts:
In my study I will look for the relationship between the Gini coefficient and trade, FDI and other variables. However, as I was regressing it... the result turn out to be insignificant. My data that I used then were 'trade as a percentage to GDP' and 'FDI as a percentage to GDP'.

On the other hand, when I regress it with just the total of trade and FDI... it brings a somewhat significant result.

Can I drop the 'as a perentage of GDP'? And just use the total trade and FDI without that?

Plus I only have 16 years worth of data, though.


texts: Why are there two formats for the Solow capital evolution equations?

texts:
I have seen the capital transition equation take two forms

$$K_{t+1} = sY_t +(1-\delta) K_t $$
$$\dot{K}_t = sY_t - \delta K_t$$

Obviously I can rewrite the top one to get

$$K_{t+1} - K_t = sY_t - \delta K_t $$

So that suggests somehow

$$\dot{K}_t \equiv K_{t+1}-K_t$$

But as far as I know,

$$\dot{K}_t \equiv \frac{\partial K_t}{\partial t} = \lim_{h\rightarrow 0} \frac{K_{t+h} - K_t}{h}$$

which is, as far as I know, not the same as $K_{t+1}-K_t$.

my question

Is
$$\dot{K}_t \equiv K_{t+1}-K_t$$
right? If so, what does this mean and why isn't it the usual derivative?


texts: Did the financial crisis affect the retirement patterns of Baby boomers?

texts: Baby boomers are retiring and have been for a few years already. The financial crisis potentially made a large fraction f them change their retirement plans. Is there some measure / study of this effect? Are there any references to look at?


texts: Why does the Balance of Payments have to (more or less) equal zero

texts:
It seems to me that the non-reversible transactions included in the current account, and the reversible transactions included in the capital and financial account, are unrelated, and should therefore be able to fluctuate independent of one another.

Imagine an economy where each person bought a huge number of items online from overseas. The balance on current account would be negative... but the capital and financial account unaffected, meaning they no longer add to zero.

What am I missing?


texts: A question regarding definition of Pareto efficiency

texts: It says on Wikipedia: "All the points on this locus are Pareto efficient allocations, meaning that from any one of these points there is no reallocation that could make one of the people more satisfied with his or her allocation without making the other person less satisfied." But aren't different points on the contract curve different "reallocations"? Some of the points have better utility for both players than others. Isn't that a contradiction or did I miss something?


texts: How to find Marshallian demand of $u(x,y,z)=x+y^2+2z^2$?

texts: Consider the utility function $u(x)=x+y^2+2z^2$. How to derive Marshallian demand for a consumer with these preferences?


texts: How does inflation in income go 'hand in hand with inflation in prices'?

texts:
Source: p 594, Economics, 3 Ed, 2014, by N G Mankiw, M P Taylor

  Yet further thought reveals a fallacy in this answer. When prices rise, buyers of goods and services pay
  more for what they buy. At the same time, however, sellers of goods and services get more for what they sell.
  Because most people earn their incomes by selling their services, such as their labour, inflation in incomes goes
  hand in hand with inflation in prices. Thus, inflation does not in itself reduce people‘s real purchasing power.

Is the bolded (independent) clause too presumptuous? I doubt its truth. Even if hand in hand means any positive correlation weaker than 100%, the bolded can be false. For example, despite being in view of inflation in prices, a greedy employer can simply refuse to increase wages. Then no inflation in incomes exists, and so inflation DOES reduce people‘s real purchasing power?


texts:
What are some books for pricing theory with heavy math?

I've finish reading pricing theory by Hirshleifer and another by Lansburg but both are not math intense.


texts: Impact of election outcomes on individual's mood? Behavioral Finance

texts:
I am currently working on my thesis in behavioral finance. My topic is about short term stock returns after the elections. One paper ("Sport Sentiments and Stock Returns")  proves that the losing country in a sports game exhibits much lower short term stock returns because of the sport event's impact on the mood of individuals. I would like to make a similar argument about the elections in two party systems where close to half the voters will feel like they have lost the elections. My hypothesis is that this could lead to a downbeat mood for everyone who 'lost' the election and consequently lead to lower short term returns. My question now is if anyone knows about a study which has investigated if the outcomes of an election influence the mood of individuals?

TL/DR:

Does anyone know papers investigating the impact of election outcomes on individual's mood?

Thanks for your help in advance!


texts: Animals living in packs must have ways to decide how to distribute their goods among the pack members.  Just like prices can appear in an exchange economy, prices could appear in pack economy.  Though money can serve many different functions, are there examples of money-like objects (abstract symbols of value?) in the animal kingdom?


texts:
What are the advantages of Import Substitution Industrialization?
I had been researching and cant find answers.


texts: Extensive form: backward induction & subgame perfect nash equilibria?

texts:
I've been given the SPNE through backward induction, I just want to understand how to interpret the equilibria properly.

The SPNE: $(agi,de)$ and $(bgi,df)$

For instance, how would I interpret $(agi,de)$?

Please let me know if the following would be an accurate interpretation of the above:

If A chooses a first, then B will play d.
In the event that we end up on the right hand side of the extensive form, B will select e and A will subsequently select g. However, if given the opportunity, A will select i.

This is supposed to be a complete contingent plan of action for both players (i.e. if it were in matrix form then we would be looking at all possible strategies for all players).

I find the first part quite easy, i.e. If A selects a, then B will select d which can be represented by $(a,d)$. However, I am getting confused when I have to account for all possible strategies that could be played $\rightarrow$ $(a \color{blue}{gi},d \color{blue}{e})$.
I would appreciate it if you could offer some advice.


texts: How does the money supply behave when bank loans are repaid?

texts:
In a fractional reserve system when banks lend out money, that money is created out of thin air by a accounting journal entry, and the money supply goes up by the amount of the loan & when the loan gets paid off, that money disappears back into thin air and the money supply goes back down which is often also described as "destroying the money"

As under normally amortized loan, out of monthly payments, some part goes towards interest & some towards principal repayment, so the question is does the money equivalent of principal repayment disappears into thin air every time the payment is made towards principal of the loan, or does it only disappears at end of the loan term all at once when the loan has been repaid in full?

If the money gets destroyed or rather disappears from the money cycle every time the principal is repaid from the monthly payments, then does it means that the banks are only left with the interest parts & nothing out of the principal portion on their books?

Also how does the money gets depleted from the money cycle and disappears into thin air in the case of "interest only loans", where during the term of the loan only interest payments are being paid by the borrower & the principal is repaid all at once at the end of the term of loan in form of a single one time payment.

So is it that in such interest only loans because the principal gets repaid all at once at the end of the loan term so at that time immediately it gets depleted from the money cycle all at once & disappears into the thin air?

And most importantly: if all of the money equivalent of the principal amount of loans disappears then how does the banks end up recovering the actual amount loaned by them to the others & not just the interest on that loan?


texts: Are all constant-sum games games of pure conflict, or only zero-sum games?

texts:
The title essentially says it all. I am asking since I came across the following statement: “Zero-sum games are also known as games of pure conflict”. This seemed to imply that zero-sum and pure conflict are synonyms, which confuses me since I figured that all constant-sum games should be games of pure conflict, by definition.
So, are all constant-sum games games of pure conflict or are there some constant sum games that do not follow this rule?


texts: Marginal Revenue Interpretation of Auctions

texts:
I'm reading Klemperer's survey on auction theory (pages 17-18) which discusses the relation between traditional microeconomic price theory and the revenue equivalence result. Firstly, I don't quite understand the analogy: marginal revenue is the revenue due to additional quantity sold, but an auction might just sell a single non-divisible object.

  In particular, it is helpful to focus on bidders’ ‘‘marginal revenues’’.
  Imagine a firm whose demand curve is constructed from an arbitrarily large
  number of bidders whose values are independently drawn from a bidder’s
  value distribution. When bidders have independent private values, a bidder’s
  ‘‘marginal revenue’’ is defined as the marginal revenue of this firm at the price
  that equals the bidder’s actual value.

I'm not sure why "the marginal revenue of this firm at the price that equals the bidder’s actual value". Does this not assume that the bidder actually bids his actual value? This surely isn't the case for e.g. first-price auctions.

  Bulow and Roberts follow Myerson to
  show that under the assumptions of the revenue equivalence theorem the
  expected revenue from an auction equals the expected marginal revenue of
  the winning bidder(s).

I'm confused with this (which probably stems from my confusion with the earlier parts): if you sell 1 item, then trivially the marginal revenue equals the expected revenue. Surely I am missing something here.


texts: How is momentum justified as a common risk factor?

texts:
Momentum as a common risk factor?

This question is partly a follow-up to another question found here. In this other question it was noted in momentum is difficult to explain as a common risk factor in factor pricing models like the intertemportal capital asset pricing model (I-CAPM) or arbitrage pricing theory (APT). In these models, it is assumed that exposure to one of these factors represent exposure to some sort of undesirable risk. In this question, I'm trying to understand how to interpret exposure to momentum as exposure to some form of common risk. In particular, I'd like to know

Who was the firm to include momentum as a risk factor? What was the explanation?
It seems like momentum is often attributed to behavioral over- or under-reaction. (This could be irrational or maybe even rational-overreaction, I suppose---right?) Is there an interpretation that rationalizes momentum? (I mean one that gives an explanation where exposure to momentum is a bad thing.)

For some reference:

Jegadeesh and Titman (1993) review some explanations of momentum,
including overreaction to information, relation to size effect and systematic risk, short-term price pressure, lack of liquidity, delayed stock price reaction to common factors

The paper argues that the "relative strengths" premium (the strategy of buying past winners) is not due to exposure to systematic risk, cannot be attributed to "lead-lag effects that result from delayed stock price reactions to common factors," but that the evidence seems to be consistent with delayed price reactions to firm-specific information.

  Stocks in
  the winners portfolio realize significantly higher returns than the stocks in
  the losers portfolio around the quarterly earnings announcements that are
  made in the first few months following the formation date. However, the
  announcement date returns in the 8 to 20 months following the formation
  date are significantly higher for the stocks in the losers portfolio than for the
  stocks in the winners portfolio.

  The evidence of initial positive and later negative relative strength returns
  suggests that common interpretations of return reversals as evidence of
  overreactlon and return persistence (i.e., past winners achieving positive
  returns in the future) as evidence of underreaction are probably overly
  simplistic.


texts: heteroskedasticity variance estimator bias direction

texts:
If I have a model with heteroskedasticity issue, can I tell the bias direction of the coefficents variance estimator?

I would think that because I would correct it with WLS then I get BLUE (Best Linear, Unbiased Estimator) which means the variance estimator is the smallest for unbiased coefficient but i am wrong.

Can someone please explain to me if I can know the direction of the bias and how?


texts: Where do I find the US GDP growth on FRED?

texts:
I have never used FRED before. I need to locate the annual growth rate in Real GDP to do some data analysis for my intro macro class. The TA and the Prof were utterly unhelpful and I'm frankly lost.

Specifically, I think I am supposed to use this site:
https://research.stlouisfed.org/fred2/series/A191RL1Q225SBEA

If you click on Graph tab, I can adjust the data present. However, there are a bunch of options and I can't tell which one I need.

MY QUESTION

(1) Am I looking in the right spot on FRED for the aforementioned information I'm interested in?
(2) If I am in the right spot, which version of the data do I want? Do I want "Percent change from preceding period" or "Percent change from year ago" for example. Also, what aggregation method.

I googled this terms to no avail.


texts: If porn is free on the Internet, then how do porn stars actually make money?

texts:
On the Skeptics Stack Exchange, porn is estimated to generate 57 billion dollars a year in America.  However, I've never once paid for porn, and I don't know of any other friends, classmates, students who pay for porn either.

What I am missing?  Is there porn that's targeted at wealthier, paying customers that I am not aware of?

Seems like porn is in great demand, but there's also a great supply of Internet porn, too, and thus anyone can consume porn for free these days...


texts: Is Marginal Revenue not always equal to the price?

texts:
Marginal Revenue is equal to the price in perfect competition, but MR is also defined as the revenue obtained by selling one extra unit of the good, so how is it not always the case that MR=P ?
Revenue from one unit of a good = Price of the good.

Or is that definition not true, namely MR should be seen as $\frac{\partial R}{\partial Q}$ (which deosn't really make sense for goods that are discrete things, but let's just admit it does?)


texts: Papers on the rate of returns for government-run pension plans

texts:
I'm looking for papers studying the implied rate of return for various government pension programs around the world. Both historical and expected returns. Or any study that looks at the taxes for the pension scheme, and what participants receive.

I have searched for papers on Google Scholar and found a few (on the state pension systems in USA, Germany, and Sweden), but now the searches give little yield.

Any help would be appreciated. Thanks in advance!


texts: Total market cap in country, and average p/e per country and continent(europe)

texts:
sorry I am not sure to post this question in quant stackexchange or in here. I have posted it previously in the below link
https://quant.stackexchange.com/questions/18633/total-market-cap-in-country-and-average-p-e-per-country-and-continenteurope

I want to invest my monthly saving on index fund. However, I am not sure to pick which country index fund that I want to invest. I am afraid i am investing in an index fund that is so overvalued goes over the roof and haven't manage to come back after such a long time like nikkei 1989 or 1929 or Nasdaq in 2000 maybe?

I just read the article about Warren Buffett indicator that says something like the ratio of gdp compare to the total market cap per country helps to define whether the stock market is overvalued or not for that country. I also hear a lot that the average p/e ratio of the market helps to define whether the market is overvalue or not.

In my place, I have an access to invest with an index fund in the following market: China, Hongkong , SIngapore, US, Europe, taiwan, SOuth Korea, Japan, Australia, India, Russia, Brazil.

My question is, where can I get the historical total market cap, GDP and average p/e of the market for those countries above? This really helps me to allocate my saving and prevent investing my money in an overvalued market. Thanks heaps.


texts: What is the difference between identification, calibration and estimation?

texts: In fitting theoretical models to data, what is the difference between identification, calibration and estimation?


texts: Why does one have to ask for a quote to get a price for some things?

texts: When ordering items from some companies, they don't have their prices listed. One rather has to ask for a quote to get a price, having to provide information to do so. Why is this? Why do they not just show a price? Is the only point to get customer information or are there other reasons? This is with the product model number and quantity already known.


texts: Why economic rent does not exist in perfect competition

texts:
My question is from production side. Firms which are using better resources will have low cost curves than other firms and earn more profits. To ensure the supply of these effecient resources firms have to pay more than transfer prices and this difference is economic rent. So, their whole profit is used as these economic rent and their average cost is same as theother firms which are not using better resources.

Is this type of situation possible in perefect competition?

Panel(a) are the firms using efficient resources.


texts: Behavioral Game Theory Reference Request

texts: I am interested in studying behavioral game theory, particularly in incomplete information games. However, I am having trouble finding a current "textbook" like source to learn from. I've been reading over Colin Camerer's book Behavioral Game Theory: Experiments in Strategic Interaction, however, I was curious whether there was something more recent/updated (as it's from 2003, if I recall correctly). I've found various articles on JSTOR and similar databases, but it hasn't been as fruitful an endeavor as I had hoped. Any recent text suggestions/places to look would be sincerely appreciated. (If the text I brought up is considered the "gold standard" for the field, pardon my ignorance; I've only recently started looking into the topic.)


texts: Available code for computing solutions to matching algorithms?

texts:
The question of designing matching procedure (between high-schools and students, med intern and hospitals, kidney donors and receivers,...) has been widely studied by economists and vastly contributed to Roth and Shapley receiving the Nobel memorial price in economics.

I was wondering if you knew about any freely available code out there (ideally in a relatively high-level language) able to compute solutions to the main kind matching problems for some of the most famous algorithms proposed in the literature. I am thinking of writing one, but I'd rather not it already exists.

I am chiefly interested in some piece of code to compute the solution to Deferred Acceptance algorithm in a school choice problem, but anything else would be appreciated.


texts:
Is there any empirical evidence on the value added by workers?

That is, their "productivity" minus the wage payments, social security benefits etc. that are paid by the firm?

I'm eventually looking for cross-sector or time variation, but anything would be a good starting point right now.


texts: GMM: Under What Conditions Does Adding a Seemingly Unrelated Moment Condition Increase Efficiency?

texts:
For simplicity, I'll offer the simplest of endogenous models. Suppose we have the following scalar model:

$y=\beta x+u$ where $E[ux]\neq 0,\;E[uz]=0\; \text{and}\;E[u^2|z]=\sigma^2$

Clearly we can use the following instrument to identify $\beta$:

$$E[(y-\beta x)z]=0$$
However, suppose we have another moment condition using another variable, $w$:
$$E[zw]=0$$
This moment condition doesn't contain any information about $\beta$, so under what conditions would we gain efficiency by using this additional moment condition?


texts: Are there plausible scenarios for the U.S. dollar to fall out of use as the world's reserve currency?

texts:
The U.S. has maintained an overall trade deficit for decades, essentially exporting money. For many countries this fund of 'ex-patriated' dollars has been a big tool of trade. Everyone accepts dollars. Convert Samoan clams to dollars to buy Romanian veeblefetzers.

Everyone trusts the dollar. Under what circumstances can that change?

I've seen and felt the contempt of the world toward the U.S. government since The Great Cheeto took office. He's a wild card. I have some investments in U.S. funds. I'm seriously considering pulling them.

I'm making a point of not buying US products if I can find alternatives.

As a tree farmer, I'm looking for alternate suppliers of the pots I use.

If my attitude is common, then US exports fall, the demand for dollars to buy US goods drops, at some point the holders of US debt decide that holding it is a bad idea, and there is a run to get rid of it.

Is this plausible?  Is there a plausible scenario that would cause nations to abandon the U.S. dollar as the reserve/trading currency?


texts: Elasticity Cobb-Douglas production function

texts:
I am given the production function
$y=x_1^\alpha x_2^{1-\alpha}$, where $0< \alpha <1$ I found the demand functions for minimum production cost to be
$ x_1^{*}(w_1,w_2,y)=\left ( \frac{w_2}{w_1}\frac{\alpha}{\beta} \right )^{\frac{\beta}{\alpha +\beta}}y^\frac{1}{{\alpha +\beta}} \; \wedge \; x_2^{*}(w_1,w_2,y)=\left ( \frac{w_1}{w_2}\frac{\beta}{\alpha} \right )^{\frac{\alpha}{\alpha +\beta}}y^\frac{1}{{\alpha +\beta}}$
Problem
Now, I have to find the elasticity of $(x_2^*/x_1^*)$ wrt. $w_2/w_1$. I found that $(x_2^*/x_1^*)=\frac{\beta w_1}{\alpha w_2}$ and thus
$\epsilon = \frac{\partial \frac{\beta w_1}{\alpha w_2}}{\partial (w_2/w_1)} \cdot \frac{w_2/w_1}{\frac{\beta w_1}{\alpha w_2}}$

Here I end up stuck and do not know how to reduce/evaluate this expression
What does the elasticity mean for the total production cost on input 1?


texts: Where can I read more about formula (G-T)= -(S-I) -(X-M)? And how is this formula called?

texts:
I saw this formula in following context:

I want to create Banker State. It's supposed to rely on profit from loans instead of taxes. I would like to keep taxes as low as possible.
Reply: what you're trying to do wouldn't work unless you
were running massive trade surpluses (a la Saudi Arabia). The
government debt represents nongovernment sector equity. (G-T)= -(S-I)
-(X-M) The government fiscal deficit represents the nongovernment sector's net financial savings. Government trying to build positive
debt means forcing the nongovernment sector to go into debt simply
just to pay its tax bill. It doesn't work, it would create vertical
unemployment & the automatic fiscal stabilizers would push the
government fiscal's position (which is reaction to nongovernment
sector spending behavior) into deficit.


texts: Blackwell's Sufficiency Conditions for a Contraction:

texts:
I wondered if anyone could throw some intuition on Blackwell's sufficiency conditions:
(1) Monotononicty;
(2) Discounting;
Would be genuinely appreciated to hear both terms expressed in plain English.


texts: What does "the world's strongest currency" title mean for investors?

texts:
Kuwaiti Dinar shows up as the most expensive in the world. Does that mean I better invest in KWD (or the safe USD) instead of my home currency (IDR)?

A little background: I am just an ordinary person without economics / finance background and hope to learn from the experts here. My home currency never fails to show up in the top 5 least valuable currencies in the world. Economic crises that come too often and stay too long make me wonder if I make the right decision to put all of my retirement savings in local equity mutual funds.


texts: Difference between a 3-months UK nominal spot rate and a 3-months UK treasury bill discount rate?

texts:
I am trying to collect data I could use for calibration of a short-rate modeling process, so I need data which represents the historical short-rates.

On the Bank of England webpage I came across the historical Government liability curve data, and also the 3-months UK treasury bills discount rates.

It turns out they are not the same. For example, on the 31 May 2017 the UK nominal 3-month spot rate was 0.04, and the 3-months UK treasury bill discount rate was 0.0575. Also, in the 3-months UK nominal spot rate table, values of 3-months spots are actually mostly not given.

I don't understand what is the difference between these two values, and which ones should I use for my historical data?

Many thanks for any insights on this.


texts: Is belief in future dividends the only long term value of stock?

texts:
Are future dividends the primary value backing  that a stock price will rise? (Let's assume that purchase by a competitor is an unlikely event and discount the value this might have).

It seems to me that many stocks are worth astonishingly many times more than their dividends pay, or are likely or even pay. In fact, many companies pay no dividends, and we have no expectation that that they will start paying dividends any time soon. Why buy those stocks?

If your expectation is that their value will go up, it must be because someone else will be will to pay more for it later. However let's imagine even if a company becomes phenomenally profitable, dominates over its competition to an extent that it cannot be acquired, and has lots of cash in the bank, if the company pays no dividends (let's assume its legally bound not to pay dividends for some reason, or has never paid dividends in the past or we have little reason to expect it will pay dividends in the future), where is the value in that stock to a future individual investor?


texts: Solow model: Partial derivative of k* with respect to g

texts:
Given the solow model
$sf(k)=(n+g+\delta)k$, written as
$$F=sf(k^\star)-(n+g+\delta)k^\star=0$$
I am trying to find the partial derivative of k* with respect to n
Here is what I've tried: I use the implicit function theorem such that I need to calculate $\frac{\partial k^\star}{\partial n}=-\frac{F_n}{F_{k^\star}}$. I've previously found that
$$F_{k^\star} = sf'(k^\star)-(n+g+\delta)$$
Next I want to find $F_{n}$. Taking the partial derivative and finding that $F_n=-k^\star$. However I am in doubt as to whether or not I should use the chainrule, as $k^{\star}$ is dependant on $n,g,s,\delta$. In that case I find that, because
$$\frac{\partial f(k^\star)}{\partial n}=f'(k^\star)\frac{\partial k^\star}{\partial n}$$
Then we have that $F_n=sf'(k^\star)\frac{\partial k^\star}{\partial n}-k^\star$. Thus we have
$$\frac{\partial k^\star}{\partial n}=-\frac{F_n}{F_{k^\star}}=\frac{sf'(k^\star)\frac{\partial k^\star}{\partial n}-k^\star}{sf'(k^\star)-(n+g+\delta)}$$
It seems odd to find the result of $\frac{\partial k^\star}{n}$ includes itself.


texts: Existence of optimal strategy in a choice problem with uncertainty and information structure

texts:
Consider a decision maker choosing an action, $y$, from the finiteset $\mathcal{Y}$, possibly without having complete information about the state of the world.

More precisely, let $V$ be a continuously distributed random variable (or vector) representing the state of the world, with support, $\mathcal{V}$. Let $P_{V}\in \Delta(\mathcal{V})$ be the probability distribution of $V$.

Nature draws a realisation, $v$, of $V$ from $P_{V}$. The decision maker is not aware of $v$. However, she can refine her prior, $P_{V}$, upon reception of a private signal which may be informative about the state of the world. In particular, let $T$ be a random variable (or vector) representing the private signal received the decision maker, with support $\mathcal{T}$. Let $P_{T|v}\in \Delta(\mathcal{T})$ be the probability distribution of $T$ conditional on $v$.
Nature draws a realisation, $t$, of $T$ from $P_{T|v}$. The decision maker observes $t$, uses the Bayes rule to update $P_{V}$ with the posterior $P_{V|t}\in \Delta(\mathcal{V})$, and chooses an action, $y\in \mathcal{Y}$. Finally, the decision maker receives a payoff, $u(y, v)$.

Let us now define an optimal strategy of the decision maker.

A (mixed) strategy is $P_{Y|T}\equiv \{P_{Y|t}\in \Delta(\mathcal{Y}): t\in \mathcal{T}\}$,  collecting probability distributions of  $Y$ conditional on every realisations $t$ of $T$.

A  strategy $P_{Y|T}$ is optimal if it allows the decision maker to maximise her expected payoff:  $\forall t\in \mathcal{T}$,  $\forall y\in \mathcal{Y}$ such that $P_{Y|t}(y)>0$, and  $\forall \tilde{y}\in \mathcal{Y}\setminus \{y\}$
$$
\int_{ \mathcal{V}} u(y,v) P_{T|v}(t)  P_{V}(\text{d}v) \geq \int_{ \mathcal{V}} u(\tilde{y}, v) P_{T|v}(t) P_{V}(\text{d} v;\theta_v). $$

Question: does an optimal strategy always exists for any information structure $S\equiv (\mathcal{T}, P_{T|V})$? Could you make an example on non-existence, if any?


texts: Doubt on the meaning of real money balances

texts:
Mankiw defines real money balances, $\frac{M}{P}$, to be the quantity of goods and services a given amount of money can buy. On page 88 of Macroeconomics 7th edition, he illustrates the concept with the following example:

  Real money balances measure the purchasing power of the stock of
  money. For example, consider an economy that produces only bread. If
  the quantity of money is $\$10$, and the price of a loaf is $\$0.50$, then
  real money balances are $20$ loaves of bread. That is, at current
  prices, the stock of money in the economy is able to buy $20$ loaves.

It is very clear to me what real balances represent in such a simple example. However, I suppose in real life $P$ would be expressed as some index, right? If $P=1.52$ is the implicit price deflator for GDP in some year, for instance, and the quantity of money in the economy is $\$1.000$, what exactly does $\frac{M}{P}=\frac{1000}{1.52}\approx657.9$ represent? How do we interpret that number? Thanks in advance.


texts: When countries industrialise, why do jobs from agriculture shift to manufacturing?

texts:
This is a historical trend whether it may 18th century Britain or 19th century America or what's currently happening in China. What I am confused is  by the fact that manufacturing jobs such as working on an assembly line are not that well paying. Still the trend holds true.

I want to know what are the causes for the shift.


texts: Not sure how to use this formula for auctions

texts:
In my textbook I was given this formula for auctions:

As far as I understand, $N$ is number of people who place bets, $P_{personal}$ means my subjective value of the current lot (it's also assumed that it's the highest subjective value among people placing their bets), $P_{max1}$ is maximum price (not sure what it means).

My textbook seems to imply, that in order to avoid "Winner's curse" our bet must be equal to $P_{max2}$ because it reflects the true value of a traded lot. Otherwise, after such victories we will go broke.

In order to calculate $P_{max2}$ we use following formula:

My difficulties are with formula for $P_{max1}$.

1.For what kinds of auctions can I use this formula?

2.What is the difference between $P_{personal}$ and $P_{max1}$?

3.Why is $P_{max2}$ supposed to be the real value of the traded lot?

4.What to do if I'm not sure that my subjective value of this lot is the highest among participants?

5.Let's suppose that I want to win the lot in order to resell it for higher price. On one hand, if I don't place high enough bet, then it will mean that I will win less frequently. And it can be painful because I can have fixed costs to be paid, no matter if I win or lose. On the other hand, by increasing my bet I decrease my profit margin. So it's unclear for me how to calculate my $P_{personal}$ in this case.

6.Please, give me the name of this formula, if it has name.


texts: Extracting group effects from individual fixed effects

texts:
I have a conceptual econometrics question I was hoping to get some help with.

I have a panel of 100 individual firms over time (10 years) at the quarterly frequency across 10 countries. One of the questions I'm interested in is about whether there are fixed differences across countries with respect to the dependent variable.

The initially obvious way to me of looking at this is to drop the firm fixed effects in my regression and include country dummies instead.

But I was wondering if it's feasible/makes sense to get at the same question by averaging the firm fixed effect parameters in some way within country groups.

And if so, would this be unambiguously better (considering that the Hausman test points to the value of including firm fixed effects)?

Thanks for your help and let me know if anything is unclear. This is my first post


texts: Was there a Role of Technology in Macroeconomic Models before Solow?

texts: Was the role of technological progress formalised by Solow (1956) for the first time? or at least he provided the initial formal insight into the role of technological progress in economic growth?


texts:
Based on the quoted section & example below:

Why would the Franc or USD fall in price vs the other if they are both fixed to gold; why would having less gold cause paper money to contract?
Why would economic growth cause upward pressure on the price of gold in terms of goods and services; yet, downward pressure on the dollar prices of goods and services.

  "When a country joined the gold standard its exchange rate against other member countries became fixed. If the exchange rate of, say, the US dollar against the French franc were to fall, then it would be cheaper for American importers of French goods to pay in gold than in depreciated dollars. Gold would flow to France. The US would have less gold to back its supply of paper dollars, which would then contract, pushing up the value of the dollar until it returned to its official price in terms of gold"

Thank you!


texts: Compute the average income and the average utility

texts:
I don't know how to compute the average income and the average utility for the second case. It is confused because I have to consider two densities $[0,0.5]$ and $[0.5,1.2]$.Can anybody tell me how to compute this?

Thank you in advance!

Edit: $\bar {z} =$ the average income, and $z_i$ = the income of an individual $i$. $U(\cdot) =$ utility function for all.


texts: Why do developing countries adopt 21st century technology, but stay behind in output per capita?

texts:
The economic growth rate of Latin America has been about 3% per year for decades; but if you have ever visited, many of the natives have: internet, smartphones, tomography, hybrid cars, etc.
Why don't they catch up when they adopt cutting edge technology?


texts: Quantitative Marxian/Marxist micro and macro economic models?

texts:
Are there quantitative Marxian/Marxist/neo-Marxist economic models like Dynamic Stochastic General Equilibrium models or Euro Area Wide (micro-founded) models - that can be used by central banks and researchers? Are there efforts to model relations between notions in Marxist economy? Maybe there is no need for separate economic models between Marxist (heterodox) and mainstream economics - maybe Marxists assume that mainstream economic models describe the reality quite accurately and that Marxism can add only decisions about resource redistribution and there is no need of models for such decisions.

I have found only one book and I have found some references about empirical work by Marxian economists - just compilation of statistics.

I wonder why I can not find more quantitative Marxism models and literature, because there should be such work:

Economists of communist countries (if we can say that - like China) and central banks of communist countries should have some models for making investment decisions, extensive models for planning and decision making (e.g. Greenspan remembered very impressive matrix calculations). Maybe these models are expression of Marxist economy.
Many countries after WWII experienced elements of state control, state planning and state intervention in economy (even US before till the Ford administration). So - these countries had to have some special models for planning and maybe they incorporated Marxian content?
I can not understand how it is possible to write about economics without using math and without having models. Marxian economists, seems to me, have this ability.

Any references, mentoring, pointers to the literature or important terms and notions are welcome!

Maybe one approach to finding my answer is using some workaround way - e.g. maybe I should seek the Chinese economic literature - it can have formalization of Marxism and at the same time current Chinese economic literature may be quite rational and quite acceptable for mainstream economics. Are there any resource of Chinese economic research in English?


texts: Pareto Set with strictly convex preferences

texts:
Suppose the agents A and B have the following utility functions $x_A y_A+12x_A+3y_A $ and $x_By_B +8x_B+9y_B$ respectively with endowments (8,30) and (10,10).

The contract curve's equation turns out to be $y_A=2x_A-6$ for interior Pareto efficient allocations.

My question is whether some portion of the edges and the origins are also Pareto efficient, and if yes, how do we arrive at them without graphing the box. Once I draw the box, it seems to me that these portions should be included.


texts: Printing Money vs. Issuing International Bonds

texts:
I'm reading Niall Ferguson's The Ascent of Money and I had a question about the economic difference between printing money vs. selling bonds to foreign entities.

At one point in the book, the author says that much of Southern Civil War effort (in the United States) was funded by issuing Cotton-backed bonds. I.e the south issued bonds that could be converted to Cotton.

The author then points out that the turning point in the war was when the Union army captured New Orleans and setup a naval blockade, which prevented European investors from collecting their cotton.

This ruined the South's ability to sell bonds, and forced them to print money to pay for war expenses, which led runaway inflation.

My question is as follows: In this case, how is issuing bonds better than printing money? Wouldn't foreign bond purchases also lead to inflation, since there would be an influx of money into the south purchasing more goods? Why did the South even bother with issuing bonds, and why couldn't they just print money in the first place.


texts: Why is Land not considered as a fixed capital?

texts: As far as I know 'Fixed Capital' includes things which don't deteriorate or get used up upto a long, e.g. tools, machinery and building etc. My question is that since Land fulfills this criteria, why is it not considered as a Fixed Capital?


texts:
What's the difference between Strongly and strictly increasing utility functions?

What I know is that if $x'>>x $ where $x'$ has all elements strictly greater than $x$ then $U(x')>U(x)$, I think this is the definition of Strictly increasing utility function. And if $x'>>x$ , then $U(x')\geq U(x)$, this is the definition of Increasing function(monotone) function. I've no idea about Strongly Increasing function. Can anyone show a graphical example if this strongly increasing assumption is violated, how will the graph look like? (Utility function's graph)

Reference is from GEOFFREY A. JEHLE PHILIP J. RENY, Advanced Microeconomic Theory.


texts: What is Q in the quantitative theory of money?

texts:
I am testing the quantitative theory of money for South Africa. QP = Mv. It is fairly clear what M and P are (broad money, or M1, price index, etc). But I am puzzled with Q. Is it GDP or does it include also intermediary inputs?

The idea of the theory is that prices depend on the amount of money and the quantity of "goods and services". But since companies and people also pay for intermediate goods and services, I think I need to consider also intermediate inputs and not only final goods and services, as in GDP.

Any ideas? Thank you very much!


texts:
I am reading Some Unpleasant Monetarist Arithmetic (Sargent and Wallace, 1981) and I had some questions about a claim made by the authors. They say:

  The public's demand for interest-bearing government
  debt constrains the government of a monetarist economy in at least two ways. One way the public's demand for bonds
  constrains the government is by setting an upper limit on
  the real stock of government bonds relative to the size of
  the economy. Another way is by affecting the interest rate
  the government must pay on bonds.

First of all, are we assuming that the government borrows from the private sector and spends it on something that improves productivity? For example, the government could borrow from the private sector and spend it on a road (something that increases productivity) or they could spend it on unemployment benefits (beneficial, but not productive). I think "real stock of government bonds" is what is confusing me. So the way I understand the first reason is that if government debt becomes too high and the interest payments exceed the growth rate of the economy, this will not be sustainable because the government will have to pay more to the private sector than is produced by the private sector.

For example, consider a extremely simplified economy where corn is the only thing produced and the agents are: (i) the government (ii) the private sector. So the government borrows 1 ton of corn from the private sector and promises to pay back 2 tons next year. They use that corn to improve corn producing ability of the private sector. However, the private sector was only able to produce 1.5 tons of corn the following year. Hence the real government debt is too high relative to the real size of the economy. Is this what Sargent and Wallace are referring to?

The second reason sounds very logical but I just want to ensure I understand it correctly. Is it simply saying that if the interest payments on government debt becomes too high, they will have to raise taxes to a level that is not optimal?

However, the second reason appears to be very similar to my corn example so it feels like I am not understanding the authors reasoning very well. If anyone could explain or refer me to a source, I would greatly appreciate it.


texts: Barro's (2009) rare disaster model in the AER: How to derive equation (10)?

texts:
In Barro (2009) Rare disasters, asset prices and welfare costs Barro develops a Lucas tree model with Epstein-Zin preferences.

My question concerns the paper's equation (10). In this equation Barro states that under the optimal solution utility $U_t$ is proportional to consumption $C_t$ rased to the power of $1-\gamma$, where $\gamma$ is the coefficient of relative risk aversion, i.e.

$U_t=\Phi C_t^{1-\gamma}$

While I understand the logic of this result, I do not understand how he derives the constant $\Phi$, which is shown in footnote 7 of the mentioned paper:

  Alberto Giovannini and Philippe Weil (1989, appendix) show that, with
  the utility function in equation (9), attained utility, $U_t$ , is
  proportional to wealth raised to the power $1-\gamma$. The form in
  equation (10) follows because $C_t$ is optimally chosen as a constant
  ratio to wealth in the i.i.d. case. The formula for $\Phi$ is, if
  $\gamma \neq 1$ $\theta \neq 1$, $$\Phi  =
 (\frac{1}{1-\gamma})\{\rho+(\theta-1)g^* - (1/2)\gamma(\theta
 -1)\sigma^2 - (\frac{\theta-1}{\gamma-1})p[E(1-b)^{1-\gamma} - 1 - (\gamma  - 1)Eb] \}^{(\gamma-1)/(1-\theta)}$$

Barro quotes the 1989 NBER paper by Giovannini and Weil. In this paper I can derive the constant. However, it looks completely different than Barro's version, because I end up with an expression that includes $E[R_t^{1-\gamma}]$, where $R_t$ is the return on equity. I believe Barro has replaced $E[R_t^{1-\gamma}]$ with the equilibrium solution of  $R_t$. However, his expression does not include any logs or exp expressions.

I would be grateful for a solution or any hints to the solution.


texts: I there an established correlation between Federal Reserve balance sheet and MB( monetary base)?

texts:
More precisely:
Are there any implied bounds for the ratio M0/FRBS with
MB= the monetary base
and
FRBS=Federal Reserve Balance Sheet?
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
https://tradingeconomics.com/united-states/money-supply-m0


texts: How would increase labor productivity lead to improved living standards of people in an economy?

texts: I would like to know more about the mechanisms through which higher labor productivity would translate into higher living standards for a population in a given economy.


texts: Adjusting a ratio variable to constant 2000 dollars using a deflator index

texts: Using Deflation index to create constant 2000 dollars, if I am finding a variable that is a ratio of that variable to GDP (say, income tax revenues), how do I go about this? Should I first divide my GDP variable for each year by the respective index value, then do the same for the income tax revenue variable, and then take the ratio of these newly adjusted variables? Or should I first find the ratio variable, income tax revenue/GDP, then divide this by the deflation index to form a constant dollar variable?


texts: Mixed Strategy Nash Equilibrium for this particular 3x3 matrix

texts:
Suppose I am given the following matrix:

I would like to find all MSNE
I started by doing the double underline method to find any PSNE. I discovered that none exist. I then looked at which strategies are strictly dominated. I noticed that Player 1 will never play M, because player 1 can always get a better payoff by playing L or R. So I eliminated the middle row "m".
After doing this, I get the following reduced matrix:

I assigned Player 2 a probability of $p_1$ for strategy A, $p_2$ for strategy B, and $1-p_1-p_2$ for strategy C. Similarly I assigned Player 2 a probability of $q$ for strategy L and $1-q$ for strategy R.
So now, we can see that Player 1's expected payoff of choosing L, that is $E(L)$, is $(1/2)(p_1)+(2/3)(p_2)+(1)(1-p_1-p_2)$
= $(p_1/2)+(2p_2/3)+(1-p_1-p_2)$
= $(3p_1/6)+(4p_2/6)+((6)(1-p_1-p_2)/6)$
= $3p_1/6+4p_2/6+(6-6p_1-6p_2)/6$
= $(3p_1+4p_2+6-6p_1-6p_2)/6$
= $(6-3p_1-2p_2)/6$
= Thus, $p_1=(6-2p_2)/3)$ and $p_2=(6-3p_1)/2$
Player 1's expected payoff of choosing R, that is $E(R)$, is $(1)(p_1)+(2/3)(p_2)+(1/3)(1-p_1-p_2)$
=$3p_1/3+2p_2/3+(1-p_1-p_2)/3$
=$3p_1+2p_2+1-p_1-p_2$
=$2p_1+p_2+1$
=$p_2=-1-2p_1$
=$p_1=(-p_2-1)/2$
Did I do this correctly?
Similarly, Player 2's expected payoff for choosing strategy A, $E(A)$, is $(1/2)(q)+(1)(1-q)$
= $q/2-1-q$
= $q/2-2/2-2q/2$
=$q-2-2q$
=$-q-2$
=> $-2=q$
Player 2's expected payoff for strategy B, $E(B)$, is $(2/3)(q)+(2/3)(1-q)$
=$2q/3+(2-2q)/3$
=$2q+2-2q$
=$2$
Player 2's expected payoff for strategy C is $(1)(q)+(1/3)(1-q)$
=$q+(1/3)-(q/3)$
=$(3q+1-q)/3$
=$2q+1$
=$q=-1/2$
I am not sure if I'm doing this correctly.


texts:
My question is related to the following equation:
$$\beta_{asset}=\frac{Equity}{Equity+Debt}\beta_{equity}+\frac{Debt}{Equity+Debt}\beta_{debt} $$

Why can the $\beta_{asset}$ be seen as if the firm had been financed only with equity?
We can measure the $\beta_{equity}$ by CAPM, but how can we measure $\beta_{debt}$?

Any help would be appreciated


texts: Effects on Early International Travel Ban and Economy

texts: Can't find articles regarding on this. Had the country set up an early international travel ban to avoid this Covid-19 pandemic, can that country survive thru local businesses after 4-6 months or more without travel flights? I am thinking that country can survive during this chaotic moment through local business since we are circulating the money within ithe country (assuming there are zero cases of Covid-19 due to early mitigation of the problem). I am not good in economics so please bear with me and if possible use layman's term.


texts:
Can you tell/ describe me what the phrase 'one dollar, one vote' means? But you have to use basic English or kid's English. :-)

I found the phrase in one economics book (Introduction to Economics by Stephen L. Slavin, page 4, 1989) and I do not know what it means. I am from eastern Europe.

Thanks for help.


texts: Equilibrium in a labour market and price floors

texts:
I'm (very) new to economics, taking it as an introductory subject at the moment. I had a quick question regarding labour markets and minimum wages imposed as a form of government intervention.

Is it generally true that for most countries, the free market equilibrium outcome would result in a price below the price floor (hence there is a minimum wage?)

Sorry if this is a stupid question, but I just wanted to make sure.
Thanks!


texts: What prevents a bank from simply going into their computer system and adding some zeros to their bank account?

texts:
This question has been bothering me for a long time and I’m hoping that someone here can help to answer it.

I will use Greece as an example, but my question could really be applied to any country or even a bank:

While a government in the Eurozone, the Greeks for example, might have an actual building in which Euro coins are minted and Euro banknotes printed, these are most likely tightly regulated, with lots of physical checks to ensure that the Greek government doesn’t just print more whenever they want to.

I understand that physical money typically makes up a small portion of the actual money supply, so I assume that “printing them selves out of debt” regardless of whether it would be legal, isn’t an actual option for them.

However, what prevents the Greek national bank from simply going into their computer system and adding some zeros to their bank account? What system prevents any bank anywhere from doing the same? Does the bank of international settlements in Basel keep some kind of record of the total global money supply? How is this kind of fraud prevented?

I’m very curious to hear the answer!