texts: Measuring inequality at the zip code or county level in the United States?

texts:
I am trying to calculate a statistic for inequality at the zip code or county level in order to merge with another data set. I am using IRS SOI data, but the data given is returns by AGI bin (i.e., 1-25k, 25-50k,..., 200k+)

This does not seem specific enough to calculate a Gini coefficient because there is no microdata available to the general public and percentile shares are not given.

How could I calculate a measure of inequality from the data in the IRS SOI datasets?
Are there better methods to approach this problem?


texts: Estimating Endogenous vs Exogenous growth models

texts:
Exogenous economic growth models (mostly those that take technological progress, or change in TFP as exogenous and random) are rather easy to estimate econometrically.

But how about endogenous growth models?

I've looked at a few papers with endogenous growth models, but they look more like small instances of CGE (computable general equilibrium) models than simple production functions with restrictions and assumptions.

My question is: what's the basic difference in parameter estimation of those models?


texts: Essential goods: How does one restrict the utility function?

texts:
I understand that solutions on boundary of the set under consideration when doing constrained optimization are often problematical. Usually it is said that we assume that goods are essential to insure an interior solution.
But are there not a set of conditions that can be imposed on the utility function for example - rather that stipulating it as a primitive - to insure that the solution is interior?
I realize that this offcourse depends on the particular program under consideration. So to be concrete I am primarily interested in the standard program where
$$\max_x \ u(x) \\
s.t. \ \ px \leq w$$
where $p>>0$ and $w>0$.


texts: Multi-dimensional interpolation routine that preserves shape AND differentiability

texts: I am looking at two-dimensional gridded data from a kinked function, but need to make it smooth. Is there a two-dimensional version of the Schumaker-routine? I would also greatly appreciate pointers to MatLab code!


texts: What is the main cause of differences in the costs of living?

texts:
Following question is not formulated in technical language of economics, since I am not an economist and I am mostly interested in accessible answers. Yet, I think it goes deeply into theory of economy and I hope it is not off-topic.

In different regions of the world, costs of living are very different. For simplicity, let us consider two countries which use the same currency (for example euro). In country A, there are high salaries, high housing costs, high costs of services, while in country B, all these quantities are lower. If we compare how much haircuts or meals in restaurant can citizen of country A buy for his salary, the number might be similar to what citizen of country B can buy for his salary. The prices of commodities often do not differ that much, but they tend to differ as well. The quality of services is similar. My question is: What is in the core of the difference in costs of living? What causes them?

To clarify, I am not interested in answers like "country A is more developed", or "country A is more rich", since it doesn't explain the issue, it just gives it another name. I would like to understand the mechanism. I have two hypotheses, which might be the cause, but I am not able to judge which one is more true, or if they are correct at all.

Hypothesis 1: History. During creation of the common currency, there was some agreement how much the national currencies are worth. (Based on international trade and older history.) This set up the level of costs of living to some value. If there is not much trade and migration between country A and B, costs of living equilibrate only slowly.

Hypothesis 2: Transfer from other sectors. If there is some high technology and well paid industry in country A, employees of this industry can afford better services and can afford to offer more money for housing, which increases salaries of all people in services and possibly transfers to all sectors of society.


texts: Can you take the moving average of quarterly data of an explanatory variable in a regression to smoothen noise and get more accurate coefficients?

texts: I'm trying to use acceleration of quarterly data on household debt (the difference in the difference in debt) in a regression on unemployment (only concerned with correlation) but quarterly data is much noisier than annual data, which may weaken the correlation. I was wondering if transforming the already differenced (twice) data as a moving average would change my coefficients at all and if they would be more accurate. Is this a common technique in econometrics?


texts: Can the growth rate increase after a change in the base year?

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Nowadays, I'm observing that the government of India is predicting much higher GDP growth for the Indian economy. I hear that the government has changed the base year, such that it is able to show a high growth rates.

Is that true?
Can anyone explain how it works?


texts: Intuitive/Practical meaning of non-stationarity of GDP Data

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As i just read in a time series book that a particular GDP data under consideration is non-stationary verified through various tests. From non-stationarity definition this means that the process has infinite memory and also specifically 'persistence of random shocks' i.e. shocks do not die away. But can someone enlighten me how I can think this intuitively or practically like say during recession GDP sinks but it eventually recovers from that period to new highs, so how does this infinite memory of old shocks or significant change in value affects the random walk of GDP over such long period of time or say in coming period after event has been happened more than 2-3 decades ago?
Please bear with the question, studying into basic intro time series subject. Thanks :)


texts: Is there a proof for composite commodity theorem?

texts:
I have been reading Economics and Consumer Behavior by Angus Deaton and John Muellbauer, specifically reading up on Composite Commodity Theorem, which states:

  if prices move in parallel to each other, then the corresponding group of commodities can be treated as a single good. (page 120 in the book)

This is a pretty mind blowing result (well at least for me), however im yet to find an actual proof for the theorem in the literature.

is there a proof for this result?


texts: Is $(\mathbb{R}^m)^n$ the real coordinate space of dimension $m\cdot n$?

texts:
Very simple question here: say that there are n individuals and each individual $i\leq n$ has a consumption bundle $x_i\in \mathbb{R}^m$ (i.e. there are $m$ types of goods). Suppose that social welfare is a function $f(x_1, x_2, ..., x_n)$. The domain of $f$ is clearly $(\mathbb{R}^m)^n$. My question whether the set $(\mathbb{R}^m)^n$ is the same as $\mathbb{R}^{m\cdot n}$?
In other words, is $(\mathbb{R}^m)^n$ the real coordinate space of dimension $m\cdot n$?


texts:
I have asked another question related to price elasticity, which pretty much left me with this problem:

I want to analyze the factors influencing the price of a product. The underlying assumption is that of a classic market equilibrium situation where the price equals the point of demand=supply. Now - how do I model such equilibrium prices and estimate the estimators correctly? How do I treat the problem of simultanious equations in this specific case? And can I simply use OLS regression in the case of price-unelastic demand since price is only included in the supply function?

I already tried reading the relevant chapters in some of the most common pieces of literature (Wooldridge etc.), but I just do not fully understand how to effectively solve the issue.

The goal is to construct a simple linear regression formula that looks like this:

$P_{t}=\beta _{0}+\beta _{1}X_{t}+\varepsilon _{t}$

where P = Price is the dependent variable.

I am sorry for bothering but I am trying to understand this topic for weeks now and I just need some basic explanation on how to solve this issue. I am really thankful for any comment/answer that sheds some light on this. The more I think about it, the more confused I get.


texts: Recursive assumption - Identifying exogenous monetary policy shocks

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I am reading through "Monetary Policy Shocks: What Have we Learned and to What End?" and am hoping someone here can offer a bit of clarity about a claim made within about how measurement error in data used by policy makers can lead to a violation of the recursiveness assumption:

For reference, equation (2.1): $S_t = f(\Omega_t) +\sigma_s \epsilon_t^s$ where $f()$ is a feedback rule that maps the information set, gamma, into action taken (systematic component of movements in the policy instrument) by the policy maker and $\sigma_s \epsilon_t^s$ represents an exogenous monetary policy shock.

The authors give this definition for the recursiveness assumption:

Now, they lay out a simple enough equation for the monetary policy instrument that incorporates a feedback rule and allows for some type of exogenous monetary policy shock:

Now, what I want to sort out is why the different states for the parameters within, given the assumption of classical measurement error, do/do not cause a violation of the recursiveness assumption:


texts:
Some of you might know of US politician Alexandria Ocasio-Cortez, a member of the Democratic Party as well as the Democratic Socialists of America. In a recent interview she had on 60 Minutes, she suggested the idea of raising the top marginal tax to 70% for income above 10 million dollars. The recent conversation surrounding this proposal is unsurprisingly heated (though mostly unproductive, as people struggle to understand what a marginal tax rate entails).

  My question is what recent literature is there for determining the optimal top marginal tax rate of a country?

For example, in Piketty, Saez, and Stantcheva (2011), the optimal marginal tax rate they estimate is 83% (on a cursory search through the paper, I cannot find for what level of income though) looking at labor supply and tax avoidance elasticities, but also at a "compensating bargaining" elasticity that tends to make the optimal rate higher than other models they cite.

A good answer will briefly explain what the literature you cite argues for, with some criticisms and/or defenses of the literature and its possible shortcomings. Recent literature of course is preferred, but if an older model is needed to explain newer ones, it is fine to cite those too.


texts: Is M&A valuation a good proxy for company fair value?

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I'm building a model for estimating a fair value of a company. Naturally I'd like to see if model's predicative capabilities are any good.
Would using a value of a friendly M&A deal be a good proxy for company fair value?
One could argue that in a hostile M&A, buyer usually overpays, but in a friendly M&A both parties agree on the deal valuation having insider knowledge not only of the current status of both companies but also of their future projects, R&D, etc. which would allow them to arrive to a more precise valuation than for any external observer.


texts: Good paper/article on the mechanisms in RBC vs New Keynesian models

texts:
I have read technical books about the (baseline) RBC and New Keynesian models.

However, these books tend not to explain very intuitively the propagation mechanisms of shocks between the two models, or the difference between them. I am referring to the mechanisms by which a shock to one variable affects the other variables. Since the baseline NK model does not contain any endogenous persistence, I'm primarily interested in how these effects play out within one time period. That is: what are all the mechanisms through which a shock propagates through the system and determines a new equilibrium $E^*$ (as opposed to the equilibrium $E$ that would have happened in that time period without the shock.)

So I'm looking for an intuitive paper/article on the internal (propagation) mechanisms in RBC and New Keynesian models.

Note again, that I am interested in a primarily intuitive/economic explanation of these mechanisms, rather than an overly mathematical one since the latter I have already found in textbooks.


texts: Does a private company that is 100% financed by a bank loan have a WACC equal to the interest rate?

texts:
When estimating a company's Cost of Debt for a Weighted Average Cost of Capital (WACC) calculation we normally look into its bond yield. But for a private company with 100% debt capital structure, will the cost of debt be simply equal to the interest rate? If not why?

Thanks.


texts:
I am asked to identify the Pareto welfare weights from the FOC of the following problem

$max_{{x_1}{x_2}} U_1(x_1)\ st\ u_2=U_2(x_2)\ and\ x_{1n}+x_{2n}=yn$

The Langrangian is: $L=U_1(x_1)+\lambda_1(u_2-U_2(x_2))+\lambda(y-x_{}+x_{2})$

and the FOC's are:

$\nabla U_1(x_1)=\lambda$

$\lambda_1\nabla U_2(x_2)=\lambda$

for the i'th variable we have

$U_{x_{1i}}(x_1)=\lambda_i$

$\lambda_1 U_{x_{2i}}(x_2)=\lambda_i$

and from the Social planner Pareto problem we have

$max_{{x_1}{x_2}} \Sigma_i^2 a_iU_i(x_i)\ st\ \ x_{1n}+x_{2n}=yn$

and the focs for this problem are:

$a_1\nabla U_1(x_1)=\lambda$

$a_2\nabla U_2(x_2)=\lambda$

for the i'th variable we have

$a_1U_{x_{1i}}(x_1)=\lambda_i$

$a_2 U_{x_{2i}}(x_2)=\lambda_i$

Therefore the pareto welfare weights are

$a_1=\frac{\lambda_i}{U_{x_{1i}}(x_1)}$
$a_2=\frac{\lambda_i}{U_{x_{2i}}(x_2)}$

But if I apply the same logic to the first problem I obtain that
$a_1=1$
$a_2=\lambda_1$

But they don't add up 1.Furthermore It doesn't have sense that $a_1=1$.I think that reasoning is wrong.
Please help!
Thanks in advance


texts: Estimating $dL/dw$ with direct dependencies using total differential

texts:
I have $U(C,L) = U(C) - v(L)$ where $C$ is consumption and $L$ is labor supply. From my first order conditions, $C$ is a function of $w$, wage, and $L$. $L$ is a function of $w$ and $C$. Leisure is $N =1-L$.
In class, my Prof. used a total differential in order to estimate $dL/dw$, but I can't quite figure out how the total differential was set up in first place. Does anyone know to explain the logic of the following set up, step by step?
From the First order conditions, we have:$wU_c-U_n = 0$That was her starting point. Then, the total differential was set up as:
$(U_C+wU_{CC}\frac{\partial C}{\partial w}-wU_{NC}\frac{\partial C}{\partial w})dw + (wU_{CN}\frac{\partial N}{\partial L}+wU_{CC}\frac{\partial C}{\partial L}-U_{NN}\frac{\partial N}{\partial L}-wU_{NC}\frac{\partial C}{\partial L})dL = 0$
From here it's pretty straight forward to get the result for $dL/dw$. However, I can't quite understand how this total differential came to be. Specifically, in the $dL$ part, I can't understand why each of $U_C$ and $U_N$ was split into $U_{CN}$ and $U_{CC}$ and $U_{NN}$ and $U_{NC}$.


texts: Global stability in a ramsey growth model with multiple equilibria

texts:
Let's say that we have a model with multiple equilibria. $c$ refers to consumption and $S$ refers to natural capital stock.
The dynamics that describe the economy are as follows:

$$\dot{S}\left(t\right)=R\left(S\left(t\right)\right)-c\left(t\right)$$

where $R(S)$ is the function for environmental regeneration.

$$\dot{c}=-\frac{u_{c}\left(c\right)}{u_{cc}\left(c\right)}\left[R_{S}\left(S\right)-\rho-\frac{\bar{\psi}h_{S}\left(S\right)}{u_{c}\left(c\right)}\right]$$

is the Keynes-Ramsey equation.

My question is simple. There is always a discussion about the fact that there may be only a unique optimal path to a fixed point among the other equilibria.

However, in this phase diagram, when I take into account the directions of arrows, I think there is never a global optimum since for all initial condition $S(0)<S_{mid}$, the economy either diverges or converges to $S_{low}$. Also, for all $S_{0}>S_{mid}$, the economy either diverges or converges to $S_{high}$.

Then, is it possible to prove the non-existence of global stability in this manner? or is there any formal (and more rigorous) way to prove the non-existence of global stability? Any hint or explanation is appreciated. Thanks in advance.


texts: Is China at the golden savings rate s? If so, what is it?

texts:
Consider Solow growth model. Let $s$ denote savings rate.

Suppose we estimate China invests 40% of it GDP rather than consuming. Assuming China is dynamically inefficient because they are a developing nation, how can I estimate what it's $s_{gold}$ is? Furthermore, how do I decide whether China is at this $s_{gold}$ versus some other $s$?

Furthermore, how does one determine this in general? Like are there distinct characteristic patterns that allow me to understand these rates?

Let our production function be $Y_t = (A_tL_t)^{1-\alpha} K_t^{\alpha}$.

I am asking how one calculates $s$ and $s_{gold}$ in practice, as in, if I had to find realistic numbers for these how would I do it?


texts: In a binary-dependent variable model (logic) will the inclusion of a scale introduce endogeneity?

texts:
This question is somewhat related to my previous question, see here: https://stats.stackexchange.com/questions/463221/why-when-do-attitudinal-scales-introduce-endogeneity

I wonder why a scale as an explanatory variable will always make a binary-dependent model endogenous?

This is what an editor told me along with rejecting my paper, and as long as I don't change it/acknowledge the possible endogeneity I cannot resubmit the paper.


texts: Calculating Market Concentration without sales data

texts:
I want to calculate market concentration (HHI and C4) but I don't have sales data. Is it accurate to use the share of establishments of each firm as a proxy for market power?

Could you list some references that use this or a similar method?


texts: I am reading this book shoe dog by phil knight. There is mention of equity in one  of the pages where the banker says *Your rate of growth is too fast for your equity *  It is very confusing. From what i have read from google i understand that Equity= Assets - liabilities. Moreover , Assets increase when the sales of a product increase.I want to know how the sales increase is dangerous for equity. There is this excerpt from the book.]1


texts: Markets that are linked to options prices

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I recently went through a serious of lectures on economics and markets, and I was surprised by the lectures on options. The lecturer, said that the future prices of certain commodities like rice (food) could be closely estimated with option prices of the present. Commodities like fuel are also closely linked, but there are problems when there is war and diplomatic issues. But for things like shares, options prices are irrelevant to the prices of the future.

While I understand the second example, I was to surprised with the other two because no reason was given. If anything, shares are controlled by the society, and therefore, should have been easier to control compared to say food, which is susceptible to natural calamities.

So my question is what are the characteristics of markets that could be predicted with options prices of the present?


texts:
An LM Curve can be described as following
$M^d(Y,i) = M_0 + M_1Y – M_2i$
$M^d = M/P$
M and P are exogen
I know that $i$ is interest rate, and Y is GDP.
Why is $M_1$ and $M_2$ positive? And what does $M_0$ represent?
I can't quite wrap my head around it


texts: Price elasticity when relationship between sales, price and other factors is not linear

texts:
For commercial deployment, price elasticity is calculated through linear regression which assumes that there is a linear relationship between price and sales. I have a)price and b)social media ratings for my product. I know that social media ratings influence consumer decision to purchase or not purchase something. As per assumption of linear regression if social media rating is low we need to reduce price to improve sales. However, beyond a point price cuts will not help in increasing sales. This is a violation of linearity.

So my question is what if

1) Relationship is not linear even after log transformation of the data?

2) How can i know about the point at which i need to stop from cutting price further.

To give a background, i have already read this Econometrics: Is elasticity meaningful in my, or any, regression? However, it didn't seem to answer my second question, which is will my sales continue to increase if i keep dropping price although i have a low social media rating?

My background: I am a statistician and my economics knowledge is all i read in college. I am working a revenue optimization problem


texts: Question about maintaining fixed exchange rates

texts:
In my textbook, borrowing from abroad is listed as one of the method to increase the value of a currency by shifting its demand curve to the right.

"If the country borrows from abroad, its loans will come in the form of foreign exchange, which when converted into [its currency] will cause an increase in the demand for [it] and hence a rightward shift in the demand curve toward D1."

I (and a group of friends) am not quite sure how this works, given that borrowing from another country and converting the funds to their own currency should increase the supply of it, leading to a rightward shift of the supply curve instead.

Please help us out by clarifying the explanation from the textbook. Thanks!


texts: Lack of skilled IT workforce, but they do not raise wages

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In my country, Portugal, many IT companies are always complaining in media regarding the lack of skilled IT workforce, but they do not raise wages. We have statistical data from the government that proves what I am saying.

Companies are paying less in 2016 than in 2011 for IT workforce (-10.2%). GEP/MTSSS
From 2014 to 2017 there is a decrease of IT workforce from 110.900 to 104.300 employees. Eurostat - Employed ICT specialists

So, the facts:

Companies are paying lower salaries
The number of it specialists also decrease (probably emigration).

If there is a shortage of workers, as the companies saying, why the law of supply and demand does not apply in this specific labor market?


texts: Can you use more than one instrumental variables in an Econometric model?

texts:
Can you use two instrumental variables $z_1$ and $z_2$ at the same time for $x_1$ and $x_2$, in the following regression model

$y=a+bx_1+cx_2+dX_{other}+e$, where

$y$ is the explained variable,

$x_1$ and $x_2$ are two variables of interest that you want to study but are endogenous,

$X_{other}$ are other exogenous control variables,

$e$ is the error term.


texts: Let $\succsim$ be a transitive and reflexive relation on a metric space $X$ with closed upper and lower contour sets. If $\succsim$ is not complete, does it hold that: for all converging sequences with $x_n\succsim y_n$ for each $n\geq 1$ and $x_n\to x$, $y_n\to y$, we have $x\succsim y$? I think that without the completeness of $\succsim$ this cannot hold, but I failed to provide an example.


texts: Help understanding Lagrangian multipliers?

texts:
I am trying to understand Lagrangian multipliers and using an example problem I found online.

Problem Set Up:

Consider a consumer with utility function $u(x,y) = x^{\alpha} y^{1-\alpha}$, where $\alpha \in (0,1)$. Suppose this consumer has wealth $w$ and the prices $p =(p_x,p_y)$. That's all we were given.

Work I Did:

I then defined a budget constraint equation: $w = xp_x + yp_y$. I also then defined an associated Lagrangian for the consumer's maximization problem:
$\Lambda(x,y,\lambda) = x^{\alpha} y^{1-\alpha} + \lambda ((xp_x+yp_y)-w)$.

My question:

What does this equation allow me to do? Although I set it up given the formula on Wikipedia's page on Lagrangian multipliers, I really have no idea what the purpose of this equation is. Like I don't understand how the equation as given allows me to determine how to maximize my utility function.

Note: I am familiar with multivariable calculus and Lagrangians ($L = T -V$) in physics, but this method is new to me.


texts: Taking the partial derivative of the demand function

texts:
Define the demand function which maximizes x -> U(x) as:

$\sum_{i=1}^n$$p_i$$\zeta_i$(p, I) = I

According to my textbook if I differentiate this with respect to $p_j$ I will obtain,

$\zeta_j$(p, I) + $\sum_{i=1}^n$$p_i$$\frac{\partial \zeta_i}{\partial p_j}$(p,I) = 0

I don't understand how I get from the demand function to the output by differentiating w.r.t. $p_j$ do I have to use the chain rule, I tried that, I don't see why the function is equal to zero?

Thanks


texts:
I am reading a book on business cycle models, and it keep using the word "steady state". It never defined what that actually means.

Obviously it is the idea that some key variables reach constant levels ... but WHAT key variables? It doesn't explain that.

For example, at one point it says "zero inflation steady state". Uhm, sorry, but what? Zero inflation steady state? Of course inflation is zero in steady state ... otherwise price levels would not be constant, hence not in steady state. In fact, if inflation was ever non-zero, we can NOT be in steady state since then price levels must be changing by definition.

So what am I supposed to make of this? What is steady state??


texts:
This graph shows that South Korea, Malaysia, China, India, Pakistan, Bangladesh started around the 1970s. Income of South Koreans rocketed while Malaysia and China seem like they couldn't live up to their potential, and Indo-Pak-Bangla are sitting at the bottom with no visible change.

What is the basic problem of 3rd group I am talking about?


texts: Why must the wage barganing be derived at steady-state?

texts:
In wage bargaining theory, in the context of matching theory, firms and workers can negotiate a Nash equilibrium by maximizing a function of firms' and workers' surplus - with the purpose of allowing voluntary unemployment?. Let's say we have an objective function $N_t$ and  we're trying to maximize it with respect to wage rate and hours worked. Why do we insert the steady-state values of the surpluses in $N_t$?

Any help would be appreciated.


texts: The relationship between gross profit and tax

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I tried to do following question but I am not sure about my solution.  Please tell me your opinions

Since gross profit is strictly concave, I can say that $R’’(y)-C’’(y) <0$
Now I maximize the net profit and
FOC is $R’(y)-C’(y) -t=0$
SOC is hold because of strict concavity in y.
That is $MR(y)=MC(y)+t$ from FOC.
Now show that the implicit relationship btw y and t can be solved for the explicit choice function
$$y=y^*(t)$$
FOC with respect to y combine with above function
$R’(y^*(t))-C’(y^*(t)) -t=0$
Derivative wrt t
$$R’’(y) (dy^*/dt)-C’’(y) (dy^*/dt)-1=0$$
$$\frac{dy^*}{dt}=\frac{1}{R’’-C’’}<0$$
which means that the output will decrease as the tax goes up.
Think again gross profit
$G\pi =R(y^*(t))-C(y^*(t))$
I am not sure about my solution after this point especially.
Suppose the firm is price taker then $R(y)=py$
So
$$G\pi =py^*(t)-C(y^*(t))$$
That is, since the output will decrease as tax rises, revenue $R(y) $ will decrease as well. Accordingly gross profit will decrease.
———————
I am not sure about the last part especially. Thank you.


texts: Hedonic regression and attribute-shares in house prices

texts:
Given a house with price $P$ and attributes $h_1,\dots,h_n$, I want to estimate how much each attribute costs as a percentage of house price $P$. In other words, if we express house price as the sum of the costs of individual attributes
\begin{equation}
P=c_0+c_1h_1+\cdots+c_nh_n,
\end{equation}
where $c_0$ is the "baseline cost" of a house and $c_1,\dots,c_n$ are costs of housing attributes $1,\dots,n$, I'm interested in computing
\begin{equation}
p_i=\frac{c_ih_i}{P},\quad i=1,\dots,n,
\end{equation}
where $p_i$ can be interpreted as the cost share of attribute $i$ of a house with price $P$.

Suppose I have data on $P$ and $h_i$'s. The natural way is to run a hedonic regression to estimate the $c_i$'s. However, I face the following difficulty:

Some of the estimated $c_i$'s may be negative, which leads to the corresponding $p_i$'s also being negative. For example, an $h_i$ could be distance to work, which reduces house price as the property is located farther and farther away from work. This creates a problem for interpreting $p_i$ as a cost share since it's less than zero.

Is there a standard method in the literature to deal with the problem of negative coefficients in hedonic regression? Any reference or tips would be greatly appreciated.


texts: Why does the same parameter estimate change in multiple regressions?

texts: I have a set of results from a multiple regression table with four columns. In each column, a new variable is added. Why, however, is the initial variable coefficient different in each column? Is it due to the coefficients being jointly estimated?


texts:
I'm not sure if I'm using the term correctly but there's something that's referred to as compliance in banking. Am I correct to understand that it's the process of obeying the laws and regulatory guidelines for financial institutions in general? Or is there a more specific meaning to the term?

What would be two or three common examples of such compliances?


texts:
My country has a whopping 25% annual inflation rate. As far as I know, high inflation implies higher consumption rates, but I was hearing lately that consumption is actually lowering, while inflation rates keep climbing. I had the feeling that lowering consumption could help reduce inflation, but apparently it doesn't always work like that.

Does lowering consumption help reduce inflation rates?


texts: The assumptions of Rational Expectations Models

texts: What are the assumptions between rational expectations models and how restricted are there for the following results of economic theory? Where can I find them all gathered in some textbook or in the internet and what is the objection against REE models?


texts: How do different groups of hunter-gatherers decide which group gets to use which land and resources?

texts: I have seen literature about how hunter-gatherer groups allocate common resources within groups. But I wonder how "common" resources are allocated between groups, i.e. which group gets to use which territory when. Which institutions does it involve?


texts: Market Theory: Upper limit of capital/weatlth accumulation?

texts:
Politicians often bicker about how big the government should be when it comes to redistributing wealth.

Question: My question is simple; would a laissez-faire approach to the market always result in inequality? Is there an upper-limit to capital/wealth accumulation? That is to say, if the governments never step in, are there any market mechanisms to counter-act a few people absorbing extreme levels of wealth?

Note: I want to focus on free markets as much as possible, but if we so choose to go down the rabbit hole of "equality of opportunity" and "equality of outcome" here are my two cents: "Equality of outcome" comes off as Orwellian and dystopian in that the economy is planned absolutely, but "equality of opportunity" implies winners and losers under a market where people are free to produce, consume and compete.


texts: Coming up with a Research Topic for Undergraduate Paper

texts:
I am currently a senior in economics, and I have been pondering ideas for doing a research paper. Sometimes I go about thinking theory and trying to find applications I could apply it to empirically, sometimes I will look through datasets and see if anything interesting might come to mind, and sometimes I will just happen to think up something that could possibly be an interesting idea related to economics.

For the most part, I don't think any of the ideas I've come upon have much substance for a paper. I was wondering if anyone would happen to have any suggestions for the creative process of coming up with a topic? Considering it is undergraduate, I realize that it likely won't be anything too substantial or different than what has been studied in the field already, but I would like it to be atleast somewhat unique.

I have taken econometrics I and II, and I am leaning towards some type of research involving panel data as being the main possibility.


texts: How do I construct the score process of a Markov model and verify that it is a Martingale?

texts:
The following is a specific question that is useful for demonstrating a general idea.

Consider the following autoregressive model:
$$
X_{t+1} = \alpha_0 + \beta_0 (X_t - \alpha_0) + W_{t+1},
$$
where $-1 < \beta_0 < 1$ and $W_{t+1}$ is distributed as a normal with mean zero and variance one.

How should I go about constructing the bivariate score process associated with the parameters $\alpha_0$ and $\beta_0$? How can I verify that it is a martingale?

Progress:

I would begin by constructing the log-likelihood process as follows (conditioning on $X_0$):
$$
\ell_t(\theta \mid \textbf X) = -\frac t2 \ln(2 \pi) - \frac 12 \sum_{j=1}^t
   (X_j - \alpha_0 - \beta_0(X_{j-1} - \alpha_0))^2.
$$
Then, the score process can be constructed as
$$
s_t(\theta \mid \textbf X) =
\begin{bmatrix}
 (1 - \beta_0) \sum_{j=1}^t (X_j - \alpha_0 - \beta_0(X_{j-1} - \alpha_0)) \\
 \sum_{j=1}^t (X_j - \alpha_0 - \beta_0(X_{j-1} - \alpha_0)) (X_{j-1} - \alpha_0)
\end{bmatrix}.
$$
Is this correct? How do I proceed?


texts: Deriving average productivity from a CES production function

texts:
Following the work of Raurich et al. (2012) I got stuck trying to derive the average productivity starting from the following CES production function:

$$Y=A\left [ \alpha K^{\frac{\sigma -1}{\sigma }}+(1-\alpha)(AL)^{\frac{\sigma -1}{\sigma }} \right ]^{\frac{\sigma}{\sigma-1 }}$$

The result they get is:
$$\left (\frac{Y}{AL}  \right )^{\frac{1-\sigma }{\sigma }}=\frac{1}{\alpha \left ( \frac{K}{AL} \right )^{\frac{\sigma-1 }{\sigma }}+(1-\alpha )}$$

Is there anyone who can help me with this?


texts: annualized quarterly growth rate calculating

texts:
I was using R to calculate the annualized quarterly growth rate of real GDP by 400*diff(log(rgdp)).

If I perform in this way some of the percentage change is big.

However, if I calculate as 100*diff(log(rgdp)) than results seems to be accurate as what shows up on the most of the website.

Why is this happening? follow by the growth formula it should be multiplied by 400, not 100.


texts:
I know the law of demand which states that

  if price of a product increases then the demand will decrease

In this, I think we assume that price is a function of demand. But I feel otherwise i.e.

  if demand increases then the price of the good will increases

My reasoning:

If demand increases then the producers will capitalize on this fact and to increase their profits, will increase the price of the goods.

Where am I wrong?

Note: I have taken an introductory course on microeconomics as a minor and therefore know just the basic concepts only.


texts: Difference between embodied and commanded labor in the Labor Theory of Value?

texts:
Could the difference between "labor embodied" (production cost in labor value) and "labor commanded" (selling price in labor value) as described in the labor theory of value be attributable to the disparity between individual and social labor power?

Edit:

Individual labor power is the labor required to produce a good. Social labor power is the average labor of the society to produce the good. If the social labor is higher than the individual labor, the selling price in labor, or labor commanded as Adam Smith would say, would be higher than the labor embodied, or the labor required to produce, and profit would be possible. However, this profit might also be attributable to the utilization of frozen labor in the form of capital by the laborer. A Marxist would of course say that profits are a subtraction of the total product of living labor. Since all frozen labor was once living labor, true profit would then be theft.


texts:
I use data (adv. labor and wage) through a nonlinear model to recover the unobserved data (use fsolve in Matlab to solve this system of equations) and run a regression of labor (or wage) on these unobserved data and other observed data. The regression equation that I run is the reduced form of the nonlinear model. Is this a problem?

Two eigenfuctions:
$\lambda AX = X$ and $\lambda BY = Y$, A and B are given, L and W are the elements in A and B.

I use matlab to solve it for x and y.

I can get the regression equation $L = ax + by + cz + \epsilon$ from these two eigenfunctions.


texts: Maximizing units under a budget constraint and increasing costs

texts:
Consider two columns.

Column A has total cost per day, Column B has units bought that day. The marginal cost of each unit is increasing because of limited supply.

My goal is to estimate total possible units under a certain budget.

What I did for this was run a LOGEST estimation to get the information in the form of cost = b+ m^units
My reason for doing this is because of the increasing marginal cost per unit.

I got the function :
y = 1.00077^x + 0.24

But when maximizing it, the numbers I'm getting for units are too small under this budget.

I also ran a LINEST and got that each unit bought increases the cost per unit by approximately 0.0005814009591 $. I have been unable to make a model that uses this estimation.

Any suggestion or different approach will be much appreciated,
Thanks.


texts: Is debt servicing in the structural or cyclical budget balance?

texts:
Are the interest payments on government debt to be considered in the structural or the cyclical budget balance?

I think, since it's independent on the state of the economy, then they should go to the structural budget balance, but I'm not sure.


texts: negative initial conditions in a growth model

texts:
I try to simulate a growth model with two state (capital $K$ and resource stock $S$) and two control variables. (consumption $C$ and resource extraction $R$ )

When I try to find steady state from which I could find after the initial conditions for $K_{0}$, $S_{0}$ and $R_{0}$ , $C_{0}$.

For $S_{0}=1$ I find a negative value for $K_{0}$ and all other initial conditions are positive.

Is that possible ? I think mathematically, a negative initial condition can be fine but economically I have doubts. I have found nothing about this issue on literature.


texts: What are the advantages and disadvantages of the IS LM model?

texts: How does the IS-LM model help economists in the day to day analysis of the economy? There are just too many assumptions that are not there in the real world.


texts: The notions of Bayes Correlated Equilibrium and Bayesian Nash Equilibrium in a game with one player

texts:
I would like your help to use the correct terminology to define a Bayes Correlated Equilibrium (BCE) and a Bayesian Nash Equilibrium (BNE) in a "game" with one player. The notion of BCE in an $N$-player game has been introduced in this paper.

Let me describe the game and give the notion of BCE and BNE in an $N$-player game.

There are $N\in \mathbb{N}$ players, with $i$ denoting a generic player.

There is a finite set of states $\Theta$, with $\theta$ denoting a generic state.

A "basic game" $G$ consists of

for each player $i$, a finite set of actions $A_i$, where we write $A\equiv A_1\times A_2\times ... \times A_N$, and a utility function $u_i: A\times \Theta \rightarrow \mathbb{R}$.
a full support prior $\psi\in \Delta(\Theta)$.

An "information structure" $S$ consists of

for each player $i$, a finite set of signals $T_i$, where we write $T\equiv T_1\times T_2\times ... \times T_N$.
a signal distribution $\pi: \Theta \rightarrow \Delta(T)$.

A decision rule of the incomplete information game $(G,S)$ is a mapping
$$
\sigma: T\times \Theta\rightarrow \Delta(A)
$$

A mixed strategy of player $i$ of the incomplete information game $(G,S)$ is a mapping
$$
\beta_i: T_i\rightarrow \Delta(A_i)
$$

Definition of BCE: The decision rule $\sigma$ is a BCE for the game $(G,S)$ if, for each $i=1,...,N$, $t_i\in T_i$, and $a_i\in A_i$, we have
$$
\sum_{a_{-i}, t_{-i}, \theta} \psi(\theta) \pi(t_{-i},t_i| \theta) \sigma(a_{-i}, a_i|t_i, t_{-i}, \theta) u_i(a_i, a_{-i},\theta)
$$
$$
\geq
\sum_{a_{-i}, t_{-i}, \theta} \psi(\theta) \pi(t_{-i},t_i| \theta) \sigma(a_{-i}, a_i|t_i, t_{-i}, \theta) u_i(\tilde{a}_i, a_{-i},\theta)
$$
$\forall \tilde{a}_i\in A_i$.

Definition of BNE: The strategy profile $(\beta_1,...,\beta_N)$ is a BNE for the game $(G,S)$ if, for each $i=1,...,N$, $t_i\in T_i$, and $a_i\in A_i$ such that $\beta(a_i|t_i)>0$, we have
$$
\sum_{a_{-i}, t_{-i}, \theta} \psi(\theta) \pi(t_{-i},t_i| \theta) \Pi_{j\neq i} \beta_j(a_j|t_j) u_i(a_i, a_{-i},\theta)
$$
$$
\geq
\sum_{a_{-i}, t_{-i}, \theta} \psi(\theta) \pi(t_{-i},t_i| \theta) \Pi_{j\neq i} \beta_j(a_j|t_j)  u_i(\tilde{a}_i, a_{-i},\theta)
$$
$\forall \tilde{a}_i\in A_i$.

Question: when $N=1$, I've understood from the various versions of the paper I linked that the following terminology may be appropriate. Could you check and provide better suggestions, if any?

$S$ is called "experiment" in the sense studied by Blackwell (1951; 1953), rather than "information structure".
$G$ is called "decision problem", rather than "basic game".
The player is called "decision maker".
The BCE concept is referred to as "one-player BCE".
Also, how would you refer to the BNE concept with one player?
Lastly, are there other crucial papers in the literature introducing the concept of BCE when $N=1$? Or the paper linked is still a valid reference?


texts: Comparative data on agricultural subsidies

texts:
Where can I find data on the agricultural subsidies of each country, ideally in a comparable fashion? I've googled without success. I hope there are some experts on this forum that can direct me to specialized data sources, or perhaps books.

It seems this is all surrounded with secrecy, so no much is available online.

World bank website doesn't have this information.


texts:
I came across a True/False question in my economics problem set:

  Is the following statement true or false?
  "A monopolist can practice
  third-degree price discrimination in the two markets it serves.
  Quantity demanded at any positive price is always higher in market 1
  than in market 2. Therefore, when the monopolist profit maximizes, it
  will certainly charge a higher price in market 1 than in market 2."

The answer is false. However, I do not understand why it is false.

I considered two cases, case 1 where the monopolist charges both markets a uniform price. If the monopolist practices price discrimination, profits will increase for the monopolist, and price charged in market 1 will be higher than market 2.

Case 2 is where only market 1 (since it is the "strong" market) is served under uniform pricing. By price discriminating, monopolist will also serve market 2 as it generates profit, and price in market 1 is higher than in market 2.

Why then is the statement false? Am I missing out another case?

Any help is greatly appreciated! Thank you.


texts: What do we know about the causes of global income inequality?

texts:
According to the IMF, the GDP per capita in the USA is about \$57,000 per year. In many central African countries the figure is more like \$500 or less. These examples are indicative of the incredibly broad spectrum of levels of development observed globally.

What is the state of the art as far as economists are concerned in explaining where these income disparities have come from? Why have countries like the US grown so much quicker that those of central Africa?
What do we know about the prospects for closing this gap in the future? What are the main prerequisites for very poor countries to begin to grow quickly?
Is there a sense in which developed countries could be said to be perpetuating global inequality (for example, via unfavorable trade policies), or is the state of the developing world largely independent of "the West"?

Three questions, but I think they are fairly closely related (in the sense that the answer to 1. might well also answer 2. and 3.) so I am asking them all together here.


texts: Prove the sample variance is an unbiased estimator

texts:
I have to prove that the sample variance is an unbiased estimator. What is is asked exactly is to show that following estimator of the sample variance is unbiased:

$s^2=\frac{1}{n-1}\sum\limits_{i=1}^n(x_i-\bar x)^2$

I already tried to find the answer myself, however I did not manage to find a complete proof.


texts: Why is the Total Current Account Balance of World positive and does it mean that the world has a net Trade Surplus?

texts:
I wondered if it was possible for all countries to have a Trade Surplus - which turns out to be impossible because the total value of imports in the world must be equal to the total value of exports in the world - because one country's export is another's import, and vice-vera. With this information, I can make 2 assumptions:

All countries cannot have a trade surplus simultaneously.
The total trade surplus in the world (sum of C.A.B. of all countries with positive C.A.B.) must be equal to the total deficit. Inversely, the sum of C.A.B. of all countries must be zero.

I looked at the data for the Current Account Balance (2017 estimate) for all countries, from CIA World Factbook. However, contradictory to my assumption, here's what I observed:

Total Surplus (excluding EU from the list) = $1,469,654,370,000
Total Deficit = -$1,103,897,200,000
Net Balance = Surplus + Deficit = $365,757,170,000

A positive net balance should point out that the world has a net trade surplus - which I wouldn't expect. This can arise because of incorrect assumptions, flawed data or errors in calculation.

My question is about why I make this observation, or if my assumption is wrong, why and what does the data actually mean?


texts:
Consider a finite number of bidders, each bidding for a single indivisible object, with private independent values from some probability distribution.
There are 2 intuitive notions of (ex-post) efficiency: Pareto efficiency and the notion of efficiency that the bidder with the highest value receives the object.

Are the two ever equivalent? I can see that the second notion implies Pareto efficiency, but not the converse.


texts: Why would a politician sollicit foreign investors to come and buy real estate?

texts:
In the Netherlands we have a shortage of affordable housing. Especially in urban areas, especially housing in the price ranges affordable for young people and middle and low incomes.
This is pretty much a constant, of course now that the economy is doing well and the house prices are rising again, after the 2008 crises, it is even more true.
A couple of years ago - at a period in time when affordable housing was a scarce but real estate prices were not going through the roof - our then Minister for Housing was on television in Singapore asking investors to come buy ('invest in') Dutch real estate.

Here is a clip in Dutch, shown in a late-night show: "Starters op de woningmarkt - Zondag met Lubach (S09)"

Why?
Could there ever be any benefit for citizens when investors buy existing real estate? They are not building new houses.
Could there ever be any benefit in a situation where affordable housing is already scarce?


texts: What addition study subjects are required in the investment field

texts:
Being a CFA student, for example, I feel I need an additional course in statistics and math, but I've never worked in the field. And maybe, as a specialist working in the profession for some time you can suggest other required subjects related to the field that I am underestimating now?

P.S. I concern that the real life differs from what I think of it as a student. So I want to do my best to be a specialist to the end of my education.


texts: Are American poverty rates increasing? What about global poverty rates

texts:
http://www.npc.umich.edu/poverty/

https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-people.html

I have heard numerous times that the future has gotten better.  Poverty rates are on decline.  Yet, seeing a commercial that 1 in 6 American children are hungry got me thinking.  These sources, and others, have shown poverty in America has gotten much worse over the years.  Due to things like automation, outsourcing, increased taxes due to pay for welfare from the poverty, things will only get worse in terms of these rates.

You should not make predictions in economics.  I understand now.  But, why have we heard so many times things are getting better in these rates and they are not?  More people are hungry.  Places like America, Europe, they are poorer.  Poor may live better, but still not good.

So, my specific question is whether the total fraction of the US population that is poor is getting larger and under what definition of poverty. Thanks.


texts:
Since DSGE models are a type of growth models that focus on assessing short term evaluation of economic fluctuations. Most of the models that I have seen are policy related, that assess the effect of certain monetary or fiscal policy on an economy in the short and/or long term.
Having said that, I would like to know what are other applications that such models have (and could have), and furthermore what are the scope of this kind of models, with scope I mean what this models could be also useful for, and some of the fields that are unexplored. There is no need for a very in depth answer, just with a briefing and some bibliography would suffice.
Thanks!


texts: What are the calculations that policy makers do when deciding to ease a lockdown?

texts:
I have heard this question framed as making the decision between lives and the economy. But on the other hand, I also read a StackExchange discussion(I am not sure of the link), where it was shown that historically, higher unemployment(economic indicator) led to greater mortality.

Thus, it is only to a limited extent, a choice between economy and lives. How do policymakers come up with the decisions for such a complex question? I suspect that policymakers make such decisions with an eye on the elections? By and large are there any policy decisions that lots of policymakers tend to make that goes against the conventional wisdom of most economists?

This question is focused on the coronavirus. But, I would love to see answers that explain the current situation with historical examples of past crises.

Also, I am new to StackExchange Economics. I would be grateful if people could give me pointers on how to improve the clarity of my questions.

** Edit: In response to feedback, I will narrow down the question to a comparision between Sweden and the other Scandinivian countries, which pursued radically different policies.**


texts: Why are averages preferred to extremes on the same indifference curve? Doesn't everything along an indifference curve have the same preference?


texts:
I want to know the impact of misspecifying lag levels in AR models. Say the true model is AR(P), while in estimation AR(P-1) is estimated and used for forecast.

What will be the impact of estimating AR(P-1) on the estimated coefficients of $\phi_1 - \phi_{p-1}$, can they be consistently estimated. What about the forecast error.


texts: Is there an economic interpretation of the production transformation function?

texts:
The production set has a simple meaning: It is the set of all production vectors that are feasible to a firm.

The production function also has a simple meaning: It gives the output quantity for a given vector of input quantities (for a firm that produces only one output. )

But what is the production transformation function? It is defined as the function $F(y)$ such that the production set is $\{y: F(y)\leq 0 \}$. Essentially, it is a way to encode the production set.

But is there also a meaningful interpretation of this function itself, rather than merely as a mathematical device to define the production set in a way that's analytically tractable?


texts: How to know when hype is reason of a stock prices increase?

texts:
I was going to ask if there are any industries or companies that would be insulated from experiencing price changes from hype but I'm assuming it always plays a role.

So, the question then turns to how we can absolutely know a price change was due to anticipated hype?

Perhaps this is due to a product release, incoming CEO, new management, etc.

Does a price change due to hype occur at a certain time when affecting price? Basically does it only occur before the product is released or does it take effect when or after the product is released to confirm the sentiment?


texts:
Consider an economy with four goods, two individuals and two firms. Firm 1 produces good $x$, firm 2 produces good $y$.
Consumers' utilities are $u_1(x,y,z,w)=\min\{x,2y\}$ and $u_2(x,y,z,w)=\min\{2x,y\}$.
Production function of firm 1 is $x=(1+a)z$, production function of firm 2 is $y=w$, where $a$ is a small positive number.
Consumer 1(resp. 2) owns firm 1(resp. 2). Initially, consumer 1(resp. 2) has $1$ unit of good $z$ (resp. $w$).
The question asks for an equilibrium.
My approach is first stipulating a price, then try to deduce the equilibrium, but I fails to do so, since there are 4 goods here and they are not symmetric.
Any help is appreciated.


texts: Market efficiency given asymmetric characteristics of securities markets

texts:
In an ideal market buyers and sellers in aggregate incorporate all available information and, as a result, the market price of an asset reflects its fair value.
But in real securities markets there is an asymmetry in the ability of informed capital to participate:  If a market participant thinks that an asset is overpriced then he can sell the asset short.  But there is no way to take a short position on an asset that isn't exposed to the possibility of short-term "ruin" even if the seller is long-term "correct" about the mispricing.  Bullish investors can buy and hold an asset indefinitely.  But a bearish investor who sells short can exhaust his capital and get "squeezed" out of his position by a pop in price (which can occur due to liquidity demand and plenty of other non-information-based events).  Futures and options have the same possibility of ruining a bear based on shorter-term price paths.
Is there a term in the art that describes this situation in which it's easy for capital to express positive sentiment but risky for capital to maintain a negative sentiment?
Are there theories or models that characterize expected and equilibrium prices given this asymmetry?
I.e., capital that thinks an asset is undervalued can buy it, so an asset should rarely spend time below its equilibrium value.  But capital that thinks an asset is similarly overvalued can only not buy it,* which doesn't put the same sort of pressure on the price as does buying it.  Based on this simplistic observation one would conclude that market inefficiencies should generally create excessively high prices.  But that's only meaningful to the extent that different market characteristics impose different barriers to short positions.  For example, an asset with higher implied volatility would have a higher chance of ruining a short seller, so high-volatility assets would be expected to be more overvalued.

* Yes, bearish capital can often sell short, but short selling has an added risk of "ruin."  Even capital willing to bear that additional risk will add it to the perceived risk of exposure, and so the risk-adjusted mispricing required to attract capital to sell short is significantly higher than the risk-adjusted mispricing required to attract capital to buy.  I.e., capital will not actively act on an overvalued asset until the overpricing is far greater than the underpricing required to attract the same capital to act.  So there is an asymmetric incentive to express negative information.


texts: Hypothetical: If a nation produces absolutely no good or service, would the currency notes it has have any value?

texts:
We're considering a nation for which the basic necessities are met by another nation, for free.

Now, the nation has lots of currency notes. But it produces nothing. Would I be right in saying that the value of these currency notes is an absolute zero?


texts: Preferences exhibiting local nonsatiation

texts:
I'm self studying my way through Varian's Microeconomic Analysis right now and am having trouble answering this question:

Consider preferences defined over the nonnegative orthant by $(x_1, x_2) \succ
(y_1, y_2)$ if $x_1+ x_2 < y_1+ y_2$. Do these preferences exhibit local nonsatiation?
If these are the only two consumption goods and the consumer faces positive
prices, will the consumer spend all of his income? Explain.

The solution manual says the preferences are locally non satiable except at (0,0) but I don't know why that is.

any help would be greatly appreciated.


texts: backshift operator in time series confusion

texts:
Hi All: In time series econometrics, if one has a relationship say

$y_{t} = \frac{x_{t}}{1- \rho L} + \epsilon_{t} $ where L is the backshift operator, then the expression can be re-written as the following infinite series:

$y_{t} = \sum_{i=0}^{\infty} \rho^{i} x_{t-i} + \epsilon_{t}$.

But, what is the expression ( and can it be derived easily ) when the original expression is

$y_{t} = \frac{x_{t}}{1- \rho (L)^{k}}$ where $k is some positive integer greater than 1. Just to be clear, since this is coming out so small when I look at it, the rho is not raised to k but the backshift operator is.

Thanks for the wisdom.  Also, if it's too complicated  or too long to explain, then any reference that explains it is appreciated.


texts: Coming up with a self self teaching curriculum in economics?

texts: I'm a college grad- engineer by trade and wanted to learn about economics. Since I don't know much about the subject I'm not sure exactly how to progress with learning the field. I've started with Microeconomics with Calculus by Perloff and I plan to go through some other book probably with macro, but I'm not exactly where I should go from there, nor do I know the popular learning materials. (game theory? econometrics?) does anyone have suggestions or some sort of roadmap that I could follow to make sure I get a strong foundation in economics sans going back to college? I'm pretty committed and am familiar with some deeper math so difficulty isn't a deterrent (but also keep in mind that I'd be new to the economic concepts).


texts: Is there a problem with Inflation-corrected real price?

texts: Consider CPI and PPI, Consumer Price Index and Producer Price Index respectively. Note that many book correct inflation using the above measures. However, I doubt inflation corrected by these values tells the true or whole story. Consider the following case. According to a microecon textbook I am reading, the real price of copper has been stable over the past decades despite the fact that demand soared over these decades. Let us assume that the real price is computed using PPI. If the PPI has increased siginificantly more than CPI in terms of percentage increase comparing to their common base year, then although PPI-corrected real price is stable for copper, it's relative price to basic commodities has soared. In this case, we note that PPI is not useful in assesing whether the real price of copper had risen. Rather, GDP deflator seems to be a better option. Am I correct? Any suggestion is helpful.


texts: Terminal Condition for American Put Option

texts:
In a recent book I read the author mentioned the terminal condition:

$$\mathop {\lim }\limits_{t \to T} V(S,t) = \max \left\{ {X - S,0} \right\}$$

This is intuitive to understand.

Then, the author defines: $$\tau  \equiv T - t$$

With this, the terminal condition above can be simplified to:

$$\mathop {\lim }\limits_{\tau  \to 0} V(S,\tau) = 0$$

This is not so intuitive. How can the value of the option be equal to zero in this case?

(note: in the space)   $${\Sigma _1} = \left\{ {(S,\tau )|B(\tau ) \le S <  + \infty ,0 \le \tau  \le T} \right\}$$

Notations:

$X$ = exercise price

$S$ = underlying stock price

$T$ = time to maturity

$t$ = time to today

$B(\tau)$ = optimal exercise boundary


texts: Is investment a type of saving or expenditure

texts: I am confused that if investment is a type  of saving or a expenditure .if investment is a type of expenditure then is  saving is what is left after subtracting consumption and investment from income


texts:
Consider an auction in which $k$ identical objects are sold to $
n>k $ bidders. Each bidder $i$ needs only one object and has a valuation $v_{i}$  for
  the object. In the auction, simultaneously, every bidder $i$ bids $ b_{i} $ . The highest $k$
  bidders win. Each winner gets one object and pays the $k+1 ^{st}$ highest bidder (i.e.,
  the price $p$ is the highest bid among the bidders who do not get an object). (The
  ties are broken by a coin toss.) Each of the losing bidders gets a gift of value $w$
  for their participation. (The winners do not get a gift.) Show that the game has
  a dominant strategy equilibrium, and compute the equilibrium.

It has a solution on page 9 here, but I cannot understand it.

Can someone explain me the answer or provide one? Also, do the losing bidders pay their bid amount here? And what does this line mean: "Each winner gets one object and pays the $k+1 ^{st}$ highest bidder"?


texts: In deriving the supply curve how does one create the supply curve like the one we see in textbooks (upward sloping, possible curve), if we are only given a single quantity and price at a moment in time? For example, in the oil industry we are told that the US is supplying x barrels of oil, how can we derive the rest of the curve since we don't know what the price is at x-y barrels...


texts: Why does the European Central Bank use the 5y5y rate to measure inflation

texts:
I cannot understand why the 5y5y swap rate measures inflation. I can see how the floating rate somewhat measures the rate of interest rates which are related to inflation. However I cannot understand why this swap rate is the preferred way to measure (medium term) inflation expectations.

For more information see here.


texts:
I am solving questions from Walsh and then verifying with a solutions manual. However, I keep solving a question and arriving at a slightly different answer than that suggested by the solution manual.

The solution given by the manual:

However, when I take the optimal $\pi^e$ and substitute into (121) I get

$$\pi^* = \frac{\pi^T[-1-\lambda]}{[-1-\lambda]} + \frac{\lambda k [ -1-\lambda]}{[-1-\lambda]} + \frac{\theta k [1+ \lambda]}{[-1-\lambda]} +e\frac{\lambda - \theta}{[-1-\lambda]}$$

and this simplifies to:

$$\pi^*= \pi^T + k(\lambda - \theta) - e\frac{\lambda + \theta}{[1 + \lambda]}$$

And so my issue is that I don't see how there is no $\lambda$ in the numerator of the fraction multiplying e at the end of the simplification.

Can anyone see my error? I must be missing something simple.


texts: Interpetation of coefficent in AR(1) model

texts:
An AR(1) process is given as:

$$x_t=\rho_0+\rho_{t-1}x_{t-1}+\epsilon_t$$

This regression tells us that $x_{t}$ is a function of its value at time $t-1$.

My question is, how do you interpret its coefficient $\rho_{t-1}$? by comparison in a labor economics example (where only cross sectional data is used) for a case where you regress education on wage.
$$y_{wage}=\beta_0+\beta_{1} x_{educ}+u$$
If I were to take partials of this regression with respect to $x_{educ}$ I can interpret $\beta_1$ as the marginal returns to wage from education.

In the AR(1) process, following the same steps as before, I am not sure how to interpret the coefficient $\rho_{t-1}$.

What is its meaning?


texts: Beginner level books on market economics

texts: Which books can be recommended for a beginner with a strong math background, who wishes to learn how markets work, what is a stock, what is a bond, how to trade e.t.c. and has a minimal knowledge of economics?


texts: Do tax cuts to the rich lower interest rates?

texts:
The rationale for giving tax cuts to the income brackets is that this money is then invested in new businesses which increases jobs.

If the saved money is being saved/invested instead of being spent, this would increase the amount of lending capital available and decrease interest rates.

Given that changing tax rates is a distinct and frequent occurrence around the world in a variety of contexts, there must be a lot of data available to perform a regression on.

Do tax cuts to higher income brackets cause a subsequent lowering of interest rates?


texts: What experiment could I run in order to test the 'Independence of Irrelevant Alternatives' axiom?

texts:
I need some help in designing an economics experiment to test the IIA axiom. My understanding of it is if you rank A above B then if you introduce C or D, you must still always rank A above B in any order.

The experiment should be cheap to run and it needs treatment and control variables.


texts: How do I derive Hessian of this function and check for concavity?

texts:
The function is $f(K,L)= AK^{a}L^{b}$ on the set of points $(K,L)$ with $K\geq 0$ and $L\geq 0$, assuming $A>0$
How do I find the Hessian and check for concavity?


texts: Why charge higher interest rates to poorer customers?

texts:
Consumer loans/credit charge different rates depending on the individual's risk.  In particular, it charges more to poorer individuals. Whilst this seems to make sense from a risk perspective, there is some circularity involved. This is, "the more an individual has to pay, the more risk there is s/he doesn't pay".

In other words, higher interest rates increases the risk of the loan, which means higher interest rates are charged, which increases the risk of the loan, which... etc.

is this studied by economic/finance theory? Can someone explain me the circularity and provide some intuition? It's like if standard theory looks at a linear demand and supply curve, but it seems the supply curve is exponential (more cost increases the risk which increases the cost which increases the risk...).


texts: How much would the EU budget reduce by after Brexit?

texts:
Would it reduce the budget of some €133bn by the gross amount after the rebate but before any spending from the EU into the UK (€17bn, about 12.5% according to Table 6, Page 11 of the 2017 draft budget) or by the net amount, which is some lower figure, (perhaps 6% ?) of the budget?

Assuming no changes due to other countries contributing more, etc. as a result of the UK leaving. It's purely about discerning what proportion of the budget is contributed by the UK's contribution, not what the actual change to the budget will be.


texts:
Total war requires mobilization of the economy.
The degree of a nation's mobilization can be quantified in two major ways:

Negatively: as, e.g., the reduction of "non-essential consumer production" --- describing the privations of the population.
Positively: as, e.g., the increase in "war production" (food and military heavy industrial equipment?) --- describing the increased fighting capability.

What was the degree of mobilization of major World War (1&2) combatants by year?

Motivation:

I have seen claims that the degree of "negative mobilization" of Germany was higher in WW1 than in WW2 because Hitler wanted to avoid the collapse of the home front that lead to the defeat in the WW1 (this claim seems to suggest that Hitler did not quite believe himself in the Stab-in-the-back myth).
The common theme in the Soviet propaganda is that USSR won the war because the Socialist Economy is best suitable to mobilization. Indeed, the "negative mobilization" was probably the highest in the USSR (of course, "positive mobilization" is more important to war fighting).

Complications:

It is probably impossible to find any reliable numbers about USSR.
Soviet economy has been always geared towards war production, so the changes due to war were not as dramatic as in other countries.
Similarly, German "positive mobilization" started way before 1939.

PS. I asked this on History, got nothing.


texts: How can markets can be highly efficient, even if they make errors?

texts:
A Random Walk Down Wall Street (2015 11 ed, but an 2019 ed. is upcoming). p. 105 Middle.

    $\color{red}{\text{Markets can be highly efficient even if they make errors.}}$ Some are doozies, as when Internet stocks in the early 2000s appeared to discount not only the future but the hereafter. How could it be otherwise? Stock valuations depend upon estimations of the earning power of companies many years into the future. Such forecasts are invariably incorrect. Moreover, investment risk is never clearly perceived, so the appropriate rate at which the future should be discounted is never certain. Thus, market prices must always be wrong to some extent. But at any particular time, it is not obvious to anyone whether they are too high or too low. The evidence I will present next shows that professional investors are not able to adjust their portfolios so that they hold only “undervalued” stocks and avoid “overvalued” ones. The fact that the best and the brightest on Wall Street cannot consistently distinguish correct valuations from incorrect ones shows how hard it is to beat the market. There is no evidence that anyone can generate excess returns by making consistently correct bets against the collective wisdom of the market. Markets are not always or even usually correct. But NO ONE PERSON OR INSTITUTION CONSISTENTLY KNOWS MORE THAN THE MARKET. [I bolded]

Can someone please distinguish more clearly how $\color{red}{\text{'[m]arkets can be highly efficient even if they make errors'}}$? I don’t understand the differences between market efficiency and price correctness.


texts: In a hyper-inflated economy, how do vendors know how much to raise their prices?

texts:
You regularly see stories about hyper-inflated economies. The common feature is that as prices spiral out of control, stores continually raise their prices to match the level of inflation, leading to insane costs for basic items and with note-values being increased to match prices.

Let's say that I'm running a cake stall. How do I know that I need to be charging 100 trillion fakedollars per cake rather than 200 trillion? Where do normal vendors get that kind of in-depth market info?


texts:
Suppose a company has a zero coupon bond with face value of 200 million which matures in a year.  Its assets has a market value of 300 million. The standard deviation is 30%  and the risk free rate is 5%. It does not pay any dividends. Based on the Black-Scholes model, what is the value of debt and equity? How can we replicate this option?

I'm new to finance, but don't we need to know whether this is a call or a put option to replicate it? Also how do we go about solving for the value of debt and equity using the B-S model? Wouldn't the value of debt just 200M/(1+5%)? What does it have to do with the model?


texts: Why are Big Macs supposed to cost the same around the world?

texts:
The Big Mac index is frequently mentioned in media, but I could never understand how it makes any sense. According to Wiki:

  The Big Mac Index is published by The Economist as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries.

Essentially the index is trying to say that if a Big Mac is more expensive in Switzerland compared to India, then the Indian rupee is undervalued or conversely that the Swiss franc is overvalued. But why would a Big Mac cost the same in all countries? Labor costs vary widely between different countries and so do costs such as real estate. There are even significant differences within the same country - a Big Mac in central London will cost you more than a Big Mac in a highway restaurant.

So why is the index taken at face value by anyone? How does it measure anything except the cost of producing a burger in different countries?


texts:
I have the following equation:

$$\mu =\left [s_{\pi }-v(s_{\pi }-s_{W})+\zeta   \right ]$$

And I have to derive its growth rate, which is:

$$\dot \mu =-\frac{v}{\mu } (s_{\pi }-s_{W})\dot v$$

Do you have any idea about the approach to follow? Thank you so much :)


texts: is there a way in NIPA accounts to see a measure of size/change in private debt stock?

texts:
is there a way in NIPA accounts to see a measure of size/change in private debt stock , and how is it measured?
if not then how is it measured?


texts:
Knowing the average income per capita or the median income is a rather poor economical indicator of a country, even when given in PPP\$. Knowing the (dimension-less) Gini index is somehow better, but it's too abstract a quantity and doesn't - as a number - tell too much. The Lorenz curve from which the Gini index is derived contains a bit more information but it is still hard to grasp: "What exactly do these curves tell me?"

The most objective and intuitive way of displaying income statistics possibly is just plotting the number of people over income (blue) and the accumulated income per income group (silver):

Unfortunately I find such plots only rarely. What I am looking for is a database where I can find the appropriate data (e.g. relative sizes of 10 or 20 income groups) for ideally all countries of the world.

The World Bank seems to publish only income shares held by the kth 20% which is better than nothing and does allow to draw Lorenz curves. But it would not allow to draw more detailed income distributions.

Where do I find such data: number of capita per income (with appropriate income bins: < 10%, < 20%, .... > 90% of the average (or median) income).


texts: How to estimate the labor time required to produce all necessities in a given economy (assuming all goods/services are produced domestically)?

texts:
I want to estimate how much labor time would have to be spent on producing/providing necessities in an economy if all necessities were produced/provided domestically (without imports). Assuming that we have a clear definition/understanding of what "necessary" means: how would one go about doing so?
My own idea is to use Leontief input-output impact analysis where I first create the Leontief matrix L, check the economic output from the country producing all of its imports domestically x_own_produce, and then calculating x_need by changing the final demand according to the understanding of "necessary". At some point one would also need converting factors to translate from monetary value produced in each industry into labor time (e.g. every dollar of output from a given industry requires 0.5 hour of labor). The way I would change final demand would be to provide the population with a living-wage-budget that they could spend on industries that are considered necessary.
Questions:

Open question: how would you best make such an estimate?

Is my idea a good way to make the estimate? If no: why not?

If my own idea seems legitimate to you: What data would you use? The best data I've found is IO tables from the OECD, but they have relatively few sector categories which worsen the estimate of necessary industries (for example bundling together the production of food products, beverages, and tobacco, where I would consider only the first to be necessary).

In calculating x_own_produce from OECD IO tables would it be correct to do so by setting the import column IMPO: Imports (cross border) to zero for all rows (sectors)?


texts: How to describe a utility function in words?

texts:
Suppose I have a utility function of Cobb-Douglas form

$$U(x, y) =x^{0.2}*y^{0.8}$$

I want to describe it in words. I would say like:

  The utility of consumer is captured by number of good x and number of good y. The
  indifference curve is downward sloping and convex, which means the
  marginal rate of substitution is diminishing as x increases. The
  consumer prefer y to x since y gives a higher utility level.

Is this correct and conprehensive?
Any help will be appreciated.


texts: How can the "Share of merchandise imports at current PPPs" be negative?

texts:
I'm looking at the Penn World Table 9.0 data, and find that the "Share of merchandise imports at current PPPs" (csh_m) can be negative. For example,

   country  year  csh_m
   <chr>   <dbl>  <dbl>
 1 Aruba   1970. -0.485
 2 Aruba   1971. -0.459
 3 Aruba   1972. -0.436
 4 Aruba   1973. -0.441

My initial thought is that the share of import (csh_m) here actually means "net import as share of GDP." However, this is not correct, because share of import (csh_m) and share of export (csh_x) don't have the same magnitude.

   country  year  csh_m csh_x
   <chr>   <dbl>  <dbl> <dbl>
 1 Aruba   1970. -0.485 0.427
 2 Aruba   1971. -0.459 0.435
 3 Aruba   1972. -0.436 0.441
 4 Aruba   1973. -0.441 0.477

Where can I find documentation explaining the construction of csh_m and csh_x from the Penn World Table?
If a want to construct a variable of trade openness, should I add the absolute values of csh_m and csh_x?


texts: Understanding the arithmetic in this 1690 text

texts:
Nicholas Barbon (1690, A Discourse of Trade)

  Another use of Interest, is, It is the measure of the Value of the Rent of Land; it sets the Price in Buying and Selling of Land: For, by adding three Years Interest more than is in the Principle, Makes the usual Value of the Land of the Country; The difference of three Year is allowed; Because Land is more certain than Mony or Stock. Thus in Holland, where Mony is at three per. Cent. by reckoning how many times three is in a Hundred Pounds, which is Thirty Three; and Adding three Years more; makes Thirty Six Years Purchase; the Value of the Land in Holland: And by the same Rule, interest being at six per Cent. in England, Land is worth but Twenty Years Purchase; and in Ireland, but Thirteen; Interest being there at Ten per Cent: so that, according to the Rate of Interest, is that Value of the Land in the Country.

I do not quite understand what the above means.

In particular, what does for example "Thirty Six Years Purchase" mean? Does it mean that to buy a piece of land, one pays 36 times the (annual) rent?


texts: Is real income the same as present value of income?

texts:
For example, if I know in time period 2 I will get paid £x in real terms

Where the real interest rate of borrowing and lending is r% between period 1 and 2

Is this the same as being paid £x/(1+r) in period 1?

Or is this the same as being paid £x in period 1?


texts: Term for fraction of economic value earned?

texts:
Is there a term for the fraction of economic value earned by a person in their labor that is due to their creation?

For example, a car factory laborer who's work creates:

Economic value created = $500,000

Income Paid = $50,000

Would have a value of 0.1

At the other end of the spectrum, the CEO might be

Economic value created = $2,000,000

Income paid = $1,500,000

Fraction = 0.75


texts: Doesnt the fact that cash reserves go down in recessions contradict Keynesianism?

texts: It seems cash reserve is procyclical. Also anyone have the financial cash reserve data?


texts: How can median wages be significantly different in two neighboring countries with open borders?

texts:
As an example, take Germany and Czech Republic. Both are members of the EU and therefore trade barriers between the two countries are minimal. However the median salary in Germany is nearly 3 times as much as in Czech Republic. How can that be?

Are the Germans three times more productive than the Czechs? Do they produce products that cost three times as much on the global market? If so, does this mean that Switzerland (which has a median salary twice as big as Germany) is twice as productive as Germany and six times more productive than Czech Republic?

I simply don't understand where the monetary difference comes from, especially in neighboring countries with open borders. It's certainly easy to understand in case of oil-rich nations (e.g. Saudi Arabia vs. Jordan), but not in manufacturing-based economies.


texts: Is Hayek in pro or in con of Equilibrium?

texts: I had read twice the paper Economics and Knowledge and it seems to me like he is arguing against equilibrium analysis, but I don't know if I'm misunderstanding his arguments.


texts: Are the figures quoted in this liblabcon's blog post accurate? (topic: UK banks)

texts:
Background

With regards to the UK government.

I have recently been involved in a debate stemming from figures mentioned in this blog post (the blogger was advocated by Occupy London's facebook page and verifying the level of "over-sensationalism" portrayed in the post would make or break my relationship with them both).

Here are the bare bones of what the blog post claims:

  Bankers cost this country £456.3bn in fraud.

  People on the dole cost this country £1.6bn in fraud.

  0 bankers are sent to prison for fraud.

  6000 people on the dole are sent to prison for fraud (/yr).

  Politicians had to bail the bankers out with £1.2tn, leaving the
  next generation with 3 times more tuition fees to pay.

I did post (twice) on that blog post, asking for citations, but they have not yet replied. So I turn to Stack Economics for the first time for help with either verifying/debunking two claims (100 rep points is not from involvement on stack:economics):

Questions

(i) Where (if anywhere) does the £456.3 billion come from?

(ii) Where (if anywhere) does the £1.2 trillion come from?


texts:
I’m reading about England debt in 1819 and how interest rate benefited its creditors. The country had a public debt of more than 250% of the GDP.

With peace at last achieved, London is faced with a mountain of debt that it intends to repay.  And for good reason: it is owned by the aristocracy and the most influential members of Parliament (they will not fail to make huge gains on their "consols" (consolidated bonds) thanks to the fall in interest rates,  the Rothschild's fortune dates from these days)

How does the creditors of those consolidated bonds benefited from a fall in interest rates ? How do you benefit from a fall in interest rates in general as a creditor of public bonds?


texts:
In the Law of Variable Proportions, it is said that a producer prefers to work in the second phase where it is the phase of diminishing returns while number of variable factors are increased. But shouldn't they prefer to work in the first phase where there are increasing returns?

Doesn't increasing returns seem to be a better possibility for producers rather than diminishing returns?


texts:
This question is driving me nuts.

Suppose, an individual lives for two periods. In each period she consumes only one good,which is rice. In period 2, she can costlessly produce 1 unit of rice, but inperiod 1 she produces nothing. However, in period 1 she can borrow rice at
an interest rate $r$ > 0. That is, if she borrows $z$ units of rice in period 1,
then in Period 2, she must return $z(1 + r)$ units of rice. Let $x_1$ and $x_2$ denote her consumption of rice in period 1 and period 2, respectively; $x_1$, $x_2$ ≥ 0. Her utility function is given by $$U(x_1, x_2) = x_1 + βx_2$$, where β is the discount factor, 0 < β < 1. Note that there are only two sources through which rice can be available; own production and borrowing.

Now suppose that there are N agents in the above two period
economy. The agents are identical (in terms of production and utility
function) except that they have different discount factors. Suppose that
β follows uniform distribution in the interval [ 1/2, 1]. Assuming r ≤ 1, what would be the demand function for rice in period 1?

My approach is integrating $\beta$ from 1/2 to $\frac{1}{1+r}$, and my answer comes out to be $\frac {N(1-r)} {1+r}$, but I dont think that's right.


texts: perfect bayesian nash equilibrium is simply nash equilibrium

texts:
Is it true that for two player zero sum game, Perfect Bayesian Nash equilibrium is simply Nash Equilibrium?

I am learning game theory and our lecturer does not explicitly cover it.


texts: Why doesn't the ECB implement the same fiscal and monetary policy that the FED used to save the US economy?

texts:
If the Fed managed to save the US economy with their liberal expansionary policy, why doesn't the ECB follow suit if it is much more efficient in reducing unemployment etc?

Also, why did Quantitative Easing work to better effect in the US compared to so far in Europe?


texts: When regarding the CPI, why is the selection of G&S within it always favorable to what it has been for years? I ask because some economists and businessmen have seemed to find goods and services that have proved the CPI and inflation cohesion wrong. Are they fishing to deeply to find G&S that is to abstract? Or is that they are opening a larger topic of discussion that no one wants to believe?


texts: What happens to effective consumption and capital in the Ramsey/Cass-Koopmans(RCK) model when technological growth decreases?

texts:
Is the conclusion that both decline correct? Both long and short run.

Let $g_x$ denote growth rate of $x$, $g_c$ the growth rate of $\hat c$. In the model there is no depreciation so,

$$ g_c = \frac 1{\theta}[r - \rho - \theta g_x] $$

$$\dot {\hat k} = f(\hat k) - \hat c - (n+g_x)\hat k$$

At steady state growth of $\hat k$ and $\hat c$ are both $0$. When that is the case:

$$\hat c^* = f(\hat k^*) - (n+g_x)\hat k^*$$

Also since $r = f'(k)$

$$f'(\hat k^*) = \rho + \theta g_x$$

Somehow based on these equations I reach the opposite conclusion, i.e. that $\hat c^*$ and $\hat k^*$ will increase rather than decrease if $g_x$ is reduced.


texts:
Let $\mathbf{y} = \mathbf{X_1}\mathbf{\beta_1}+\mathbf{X_2}\mathbf{\beta_2}+\mathbf{u}$.

Let $\mathbf{X} = [\mathbf{X_1} |\mathbf{X_2}]$.
Define $\mathbf{M_i}$ to be the complementary projections for $i = 1,2$.

Then, $\mathbf{M_xM_1} = \mathbf{M_x}(\mathbf{I} - \mathbf{P_1}) = \mathbf{M_x - M_xP_1} = \mathbf{M_x-[I-P_x]P_1} = \mathbf{M_x-[P_1-P_xP_1]} = \mathbf{M_x - [P_1-P_1]} = \mathbf{M_x}$.

Could you check if this is okay?


texts: Does the US Bureau of Economic Analysis use the generic growth formula to calculate percent change of GDP?

texts:
My question is so basic, I'm embarrassed to ask it. (I study computational theory, not economics.) I'm looking at quarterly GDP numbers and growth rates. I've tried to arrive at the BEA's CPGDPAI numbers using the generic formula:

GDP(t)/GDP(t-1) = (1 + r)^t - t-1

Which fails miserably. I'm grateful for some light on this.

Update:

So, it's the data, not the math. I was pulling the nominal GDP data off FRED. After plugging in the the GDPC1 data, it was all right as rain. A rookie mistake, but, well, I'm a rookie. Thanks for the answers below.


texts:
I've seen some articles online about the Cyprus-style bail-ins

When the bail-in actually happened there, they took money from people's accounts, but from where did they take the money?

For example, if someone had a CD there or a brokerage account with the bank, were those included as targets for bail-ins? Or was it limited to savings and checking accounts?


texts: Is there a school of thought or concept that acknowledges that people aren't rational actors when it comes to economic decisions?

texts:
People are subject to all sorts of cognitive biases.

For example:

Advertising works, and not just by making people aware of a product,
but by appealing to emotional quirks.

People are subject to psychological pricing.

It seems clear that people aren't entirely cold calculating rational agents, calculating the maximum utility and acting accordingly.

Is this acknowledged in any economic theories, or is it more or less ignored?


texts: How to consolidate data for "single customer view", what models to use for representing customer?

texts:
There is trend to arrive at "single customer view" - combine all the available quantitative and qualitative data about single customer. How to organize those data for using in prediction and anylsis?

My guess is that all the data should be used for calibration of parameters of some model. But what models are available for representing single customer preferences and behavior? Does agent models from computer science (e.g. BDI - Beliefs-Desires-Intentions) can be used? Maybe neuroecnomics can be of help for building up such models (using choice, cost un intemporal discount functions)?


texts: Which currency do we consider when talking about trade balance ?

texts: The Marshall Lerner condition and the J curve made sense until one day I noticed that to make sense of all of this , we considered two different currencies. I was told for e.g. in the short run, export revenue would deteriorate since demand would be inelastic. But prices for exports only fell for the foreign buyer, not for domestic firms. If quantity being sold rose even by little, won't revenue earned by local producers have increased? Similarly, we considered effect on imports but this time considering domestic currency. My question is that when we look at trade balance , which currency do we use for analysis.


texts: What are the advantages of using demand systems estimation? How is this different from individual demand estimation for product?

texts: I don't understand how is demand systems estimation is different from simple demand equation estimation. What's the best resource for getting a history line of demand systems?


texts: How to assign a set of parameters to a macroeconomic model in Matlab?

texts: I am trying to assign a vector of values (v= [1/3 0.01 0.5]) to a vector of parameters (w = [alpha beta gamma]) in order to make Matlab save the entries of the value vector as the parameter values. So for instance the third entry of v should be assigned to the third value in w. Matlab should then save gamma = 0.5 in the workspace. I was not able to figure out how to do it. My solution always just overwrites the other vector but does not save the entries in the workspace. I hope, someone can help me out.


texts: Why is there a stochastic discount factor in firms present value?

texts:
In a book I am reading, the problem of the firms is described as maximizing current market value of profits.

$$\max \sum_{k=0}^\infty \Delta_{t, t+k} \cdot "\text{profits in period k}"$$

So, basically, it's all profits, discounted back with discount factor $\Delta_{t, t+k}$. Except, the discount factor is defined in the book as $$\Delta_{t, t+k} = \beta^{k} U_{c, t+k}/U_{c, t}$$

where $\beta$ is a discount rate, and $U_c$ is the first derivative of the utility function of the consumers.

What I don't understand is, why are the derivatives of the utility function of consumers with respect to consumption involved in the discount factor? Why is it not just $\beta$? The book gives no explanation of where this discount factor came from.


texts: In law of DMU statement what is meant by "keeping other commodities"?

texts: Law of Diminishing Marginal Utility states that marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant. Here my doubt is that "keeping consumption of other commodities constant" means what? Here "other commodities" means which are those? Please clarify this with an example.


texts:
There are several criteria (or key figures) to list the world's "largest" companies, giving quite different lists:

revenue (in \$)
profit (in \$)
assets (in \$)
market capitalization (in \$)
number of employees

For any company the following key figure or financial ratio makes sense (for investors mainly), depending on the exact definitions of "profit" and "revenue":

profit margin = profit / revenue

For public companies the following key figures / criteria / financial ratios make sense, too:

wage per employee = average wage (in \$) = total wages / number of employees
median wage (in \$)
minimal/maximal wage (in \$)
revenue per employee (in \$)
profit per employee (in \$)
assets per employee (in \$)
market capitalization per employee (in \$)

  Where do I find concise overviews and comparisons of such numbers for large companies like these (sorted by revenue) (yellow = state-owned enterprise):

[Please tell me better tags for this question than those I have used!]


texts: In my history class, we're studying the Industrial Revolution and how Rockefeller came to dominate the oil industry with his Standard Oil company. According to our textbook, a man named Samuel Dodd (who was Standard Oil's attorney) came up with the trust in 1881. But our textbook does a very poor job of explaining what exactly a trust is or why it helped Rockefeller to monopolize his business and basically dominate the oil industry. I've done a bit of research myself, and I'm not really good with economics. Could someone please explain, in very simple layman terms, what a trust is and what it does?


texts: What is the justification for it being a problem if loans are not paid back?

texts:
As far as I could understand, the loan system applied by banks which is based on a fractional reserve system works as follows:

Assumptions:

The bank has initially 1000$.
The fractional reserve is currently 10%.
For simplicity, we assume that all deposits are made only on this bank, instead of having multiple banks. It has been argued in many places that, for the overall view of the money system, that this is a justfied assumption.

The following happens now:

1) Guy A makes a loan for 900\$. The bank keeps 100\$ (more than 10%, thus ok).

Total loans owned by bank: 900$
Total deposits owned by bank: 100$

2) Guy A pays guy A', which deposits the money on the bank again.

Total loans owned by bank: 900$
Total deposits owned by bank: 1000$

3) Guy B makes a loan for 800\$. The bank keeps 100$ as a new reserve (more than 10%, thus ok).

Total loans owned by bank: 1700$
Total deposits owned by bank: 200$

4) Guy B pays guy B', which deposits the money on the bank again.

Total loans owned by bank: 1700$
Total deposits owned by bank: 1000$

This repeats itself a couple of times, until we arrive at:

Total loans owned by bank: 5000$
Total deposits owned by bank: 1000$

From the deposits, 500\$ are reserves of the bank, which belong to the bank, and 500\$ are money which is owned by the last guy that got money from another guy.

Ok, so this is, as far as I understood, the beginning of the "loan process with a fractional reserve system", with a couple of loans. The bank has still enough reserves, so it did everything ok.

Now let's assume that Guy A comes to the bank and says "Hi, I'm sorry, I can't give you the money back, I'm broke".

Currently, the following thing happens: The bank says "ok, so you must give us your security to cover our loss" (for example the car).

Question: Why does this happen, what is the justification for taking the car from Guy A? Since the bank never lost anything...?


texts: Implicit Differentiation & Profit Function

texts:
Here is the question:

A firm produces one output commodity. The cost of producing and selling $x$ units and spending $y$ dollars on advertising is $C = cx + y + d$. The resulting quantity demanded is given by $x = \gamma ap + b + R(y)$ where $p$ is the price per unit. We assume that $R(0) = 0, R′(y) > 0$ and $R′′(y) < 0$. The constants $a, b, c, d$ are all positive.

Determine the profit function from selling $x$ units and spending $y$ dollars on advertising; call it $\pi(x, y)$.
Write and solve the following system of equations:
$$\frac{\partial \pi(x^*,y^*)}{\partial x} = 0$$
$$\frac{\partial \pi(x^*,y^*)}{\partial y} = 0$$

where $x^* > 0$ and $y^* > 0$ represent the number of units sold and amount spent on advertisement that maximize profits. In this case, solving the system means finding one equation that only depends on $y$, the function $R(\cdot)$ (and its derivative), and the parameters of the problem $(a, b,...)$ - in other words an equation where $x^*$ has disappeared.

The equation found in the previous question defines $y^*$ implicitly as function of $a, b,$ and $c$. Find $\frac{\partial y}{\partial b}$ by implicit differentiation.

Embarrassingly, my problem seems to be with the profit function. If we get a revenue function by $p \cdot x$ we are left only with an $x$ in the cost function, I cannot figure out how to get a profit function which would result in $y^*$ as a function of $b$. Anyone know what I'm doing wrong?