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1500 questions
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Why is CRRA utility often used in macroeconomics DSGE model?
As title says, why is CRRA utility often used in macroeconomics DSGE model? That is, the form of
$$u(c_t) = \frac{c_t^{1-\sigma}}{1-\sigma}$$
I cannot find any theoretical background around this..... After all, there is often no risk involved in…
Kamster
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When countries industrialise, why do jobs from agriculture shift to manufacturing?
This is a historical trend whether it may 18th century Britain or 19th century America or what's currently happening in China. What I am confused is by the fact that manufacturing jobs such as working on an assembly line are not that well paying.…
Kiran Yallabandi
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Is the Federal Reserve issuing money in a fair way?
Basic logic says that, once a central bank is issuing new money for increasing the money supply, the money should be distributed fairly between all the citizens, and that means giving them all an amount equal in proportion to their income (say a 5%…
Joe Jobs
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References for particular definitions of risk and uncertainty
I have some doubts about risk vs. uncertainty. I have read the thread "What is the difference between risk, uncertainty and ambiguity" and have skimmed through Knight's "Risk, Uncertainty, and Profit" Chapter VII (starting on p. 197). It seems there…
Richard Hardy
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Why is capital often not included in New Keynesian models? Is there a reason other than modeling difficulty?
In New Keynesian models, like the ones in Gali's simple New Keynesian model or even Mankiw-Reis NK model on sticky information, capital is often not included.
Now people do say that there are modeling difficulties and that's why capital ($K$) is…
NewK
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In log-linearized New Keynesian model, what do $Y$, $Y_t$, $y_t$ actually mean?
This may be a weird question, but I am unfortunately confused by terms. Let us suppose log-linearized New Keynesian model as suggested by Gali here: http://crei.cat/people/gali/pdf_files/monograph/slides-ch3.pdf
My first question is, apparently…
NewK
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Rationality and Common Belief in Rationality in Brandenburger & Dekel (1987)
One of the fundamental results in epistemic game theory is that the solution concept of correlated rationalizability gives exactly those action profiles that are compatible with rationality and common belief in rationality. A precise statement and…
Michael Greinecker
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Meaning of Additively Separable, Linear in X
Often I see both in micro and macro two common terminology :
Additively separable.
Linear in price or linear in probability.
I understand exactly as they sound by looking at the functional form of the object.
But can someone provide why these…
Frank Swanton
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How did the Bail-In in Cyprus Work?
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…
mj_
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2 answers
Are the figures quoted in this liblabcon's blog post accurate? (topic: UK banks)
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"…
hello_there_andy
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9
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1 answer
Local and Central Wage Bargaining: What Is the Difference?
Consider the following setting:
Profit maximizing firms with production functions $\Pi(w,L)$, where $w$ is the wage and $L$ is employment.
Unions who want to maximize the expected utility of their representative union members. To explicate, let…
Elias
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5 answers
What is the difference between risk, uncertainty and ambiguity
I am trying to pin down the difference between risk, uncertainty and ambiguity.
As I understand, when behavioral economists talk about choice under uncertainty, they mean choice when agents face risk (known probability distribution over a range of…
invictus
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9
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Nash Equilibrium and Pareto efficiency
What is the difference between Nash equilibrium and Pareto Efficiency. Can you give me an example where Nash equilibrium is not Pareto Optimal?
HARSHA VARDHAN
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Why is it possible to calibrate your subjective probabilities?
Humans tend to be overconfident in their predictions; when most people say that there's a 95% chance that something will happen, they're usually wrong far more than 5% of the time. Whereas what ought to happen is that for all $x$, if a person makes…
Keshav Srinivasan
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9
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Thin indifference curves
If a consumer follows the rationality axiom of continuity (i.e. no jumps in his preferences), the indifference curves of a utility function are said to be thin.
Why does continuity ($x \succeq y \Rightarrow \exists \space z=x+\epsilon$ such that…
Omrane
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