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Simulations Using Binomial Coefficients
In closed loop toy models with a fixed money supply, what are the downsides of calculating probable outcomes with a binomial coefficient?
For example, given a toy economy where trades yield a profit or loss of $t$, and all participants start with…
Jason Nichols
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Information structure for complete information
Model
A decision maker (DM) has to choose action $y\in \mathcal{Y}$ possibly without being fully aware of the state of the world. $\mathcal{Y}$ is a finite set.
The state of the world is a random variable $V$ with support $\mathcal{V}$.…
Star
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Why the subjective "Owners’ equivalent rent of residences" is included in the CPI?
I was reading about the calculation of the Shelter index of the CPI which accounts to more than 30% of the entire basket. It consists mainly of two parts: (1) Rent of primary residence, and (2) Owners’ equivalent rent of residences (OER).
On how OER…
d_e
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Time value of money: impatience, risk, inflation... and opportunity cost?
When explaining the time value of money (e.g. the fact that \$100 today is worth more than \$100 a year ahead), I have seen 3 arguments: impatience, risk and inflation. What about a fourth argument that I would call alternative opportunity cost:
I…
Richard Hardy
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Why is the Chinese stock market weak while its economy is strong?
China's economy has had a decent growth rate even post-2008 however, the stock market indices appear to be weak and stuck at more or less the same level since long time as shown below for Shanghai, Shenzhen and Hong Kong stock market…
Kutsit
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Language of theoretical economic papers
Could anyone explain, or provide a good source to, the language used in theoretical economic papers?
For example, the difference between an assumption, proposition, postulation, theorem, lemma, axiom, corollary, conjecture, and so on.
I think that…
Eli J
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Why doesn't conventional monetary policy involve long-term interest rate targets?
Another way to phrase my question: why doesn't conventional monetary policy include manipulation of long-term interest rates?
This question might sound "weird" at first glance, but please hear me out.
While the expectations hypothesis does not…
J Li
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p-hacking vs. parameter calibration?
I'm currently tasked in my job to design a Prospect Theory (here CPT-)index as mentioned in Barberis, Mukherjee and Wang (2016): "Prospect Theory and Stock Returns: An Empirical Test", see https://nicholasbarberis.github.io/bmw17b.pdf
I wrote the…
T123
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Why is inflation higher in emerging economies?
Inflation rates are higher in emerging economies than in developed economies.
(source)
Why is that so ?
Most explanations I have found refer to some kind of catching up, but it does not immediately clicks for me.
Notably, there is some catching up…
Anthony Martin
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What is the general definition of an "investment bank"?
I'm reading "Too Big To Fail" about the 2007 financial crisis, and there's a lot of discussion about the big investment banks: JP Morgan Chase, Goldman Sachs, Bear Stearns, Lehman Brothers, etc.
I've understood the strict definition of "investment…
Deane
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Is program evaluation (DiD, RD) a structural estimation?
Consider program evaluation methods such as IV, Diff-in-Diff, and RD.
According to Haile (2021):
"Typically program evaluation requires more than descriptive analysis:
one must counterfactually hold all else equal to learn the true
effect(s) of D…
Frank Swanton
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Given a large increase in the price of an essential good, can suitable monetary policy keep average inflation very low?
Suppose there is a very large increase in the world price of an important good which is essential for many people, such as the increase in price of natural gas over the last year or so.
Considering price inflation in a country which imports a large…
Adam Bailey
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How can the exchange rate be virtually constant with major inflation rate difference and a widening trade deficit?
I have recently had a discussion with a colleague about what seems to be a rather strange macroeconomic aspect in Romania (which has RON currency):
EUR-RON exchange rate has been virtually a flat line in the past year
Romania's Balance of Trade…
Alexei
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Contradicting the von Neumann–Morgenstern axioms
This is a story taken from
Shmuel Zamir - Game theory
"This is a true event that occurred during the Second World War on
the Pacific front,5 seems to contradict utility theory.
A United States bomber squadron,
charged with bombing Tokyo, was based…
Jorge González
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In US, was there an instance in the history when two consecutive quarters of GDP decline wasn't classified as recession?
This topic has been a bit politicized. The common perception that two consecutive quarters of negative GDP growth counts as a recession is a myth. There is actually a committee that determines whether we are in a recession.
Politics aside, just…
Matt Frank
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