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1500 questions
10
votes
2 answers
What is the purpose of measuring GNP?
I know that the GDP (the value of all final goods and services produced within a country during a given period of time) is useful for determining the productivity of a nation, the size of the nation's economy, and the standard of living. The GNP…
Mathematician
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2 answers
Intuition behind risk premium
In Lecture 20 of MIT's Microeconomics course, a situation is proposed where a 50/50 bet will either result in losing \$100 or gaining \$125 with a starting wealth of \$100. It is stated that a person would be willing to insure themselves for \$43.75…
Nick
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1 answer
Banking Regulatory Frameworks, between the 1973 collapse of Bretton Woods and the introduction of the Basel Accords in 1988?
Does anyone know of any work on banking system behaviour, and in particular the governing regulatory frameworks that applied between the 1973 collapse of the gold standard based Bretton Woods system and the introduction of the Basel Accords and…
Lumi
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10
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1 answer
Causes of trade deficit: Multiple views
I am trying to understand the causes and macroeconomic implications of running a trade deficit in the United States, and I came across a few different views on this topic. I'd like to know if there are studies that try to understand the root-cause…
Vimal
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10
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5 answers
The Sonnenschein-Mantel-Debreu results, what are the implications for macroeconomics?
I have always wondered why such a negative result such as Sonnenschein–Mantel–Debreu theorem (SMD) theorem is usually ignored or disregarded by practitioners, specially in macro.
The result roughly says that there is no deep empirical implications…
user157623
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votes
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Estimating CES utility (not production) function parameters
The CES utility function has the form
\begin{equation}
u(x_1,\dots,x_n)=\left[\sum_{i=1}^n\alpha_ix_i^\rho\right]^{1/\rho},
\end{equation}
where $\alpha_i$ is the consumption share parameter and $\sigma=\frac{1}{1-\rho}$ is the elasticity of…
Herr K.
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10
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5 answers
Help understanding Lagrangian multipliers?
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…
Stan Shunpike
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10
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2 answers
Schumpeterian Business Cycles
The basic idea of Schumpeterian Business Cycles is that new technologies require creative destruction but will yield positive growth. These two opposing forces have impacts onto the real economy at different times, which will create fluctuations…
FooBar
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1 answer
Price dispersion in online retail
There are a number of online booksellers that are popular in India right now. The prices they charge for the same book often differ by as much as 10% (See this price comparison site to check http://www.indiabookstore.net/)
Since these are homogenous…
Jyotirmoy Bhattacharya
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10
votes
2 answers
Optimality of Zero Capital Taxation
The Chamley-Judd result of zero optimal capital taxation says that 0 capital taxation are required in order to maximize welfare at the steady state.
The result is 30 years old. Still assuming that we only care about the steady state, what's the…
FooBar
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votes
1 answer
Situations where revelation principle may not hold
Revelation principle is a powerful statement regarding Bayesian Nash equilibrium. However it may not hold always, as where players do not fully know their preferences, or when preference elicitation involves cost.
What are other situations where…
Bravo
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10
votes
0 answers
Replicating a state-space model
I am trying to replicate the results of Cochrane, 1998. Most of the paper is just describing the theory behind The Fiscal Theory of the Price Level. But from p. 42 he begins the econometrics aspect.
Cochrane uses a frictionless model so the…
WoodfordJr
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votes
3 answers
How is it possible that all currency exchange rates are fixed w.r.t. to each other?
I wondered if it would be beneficial to exchange a currency through one or more "in-between" currencies.
For example: instead of trading Russian Ruble (RUB) to Euro's (EUR), one would trade from RUB to US Dollars (USD) and then to EUR.
Neglecting…
Saaru Lindestøkke
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10
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1 answer
Karush-Kuhn-Tucker for series
Does the Karush-Kuhn-Tucker theorem on sufficient conditions for optimality of a convex program apply in countable dimension?
For precisions, see Definition 4.1.1 and Theorem 4.1.4 of this course. Does the theorem extend to an infinite (but…
bixiou
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10
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3 answers
Why can't countries print another country's currency?
Counterfeiting money is clearly a difficult thing for individuals, but surely a country should have no problems counterfeiting another country's currency. Why don't countries do it? For example, for the US to exert pressure on North Korea (or vice…
Allure
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