ScienceGuy

The work examines whether it is possible to accurately forecast dividend yield using aggregate stock returns in S&P500,

Problem Statement: A local council is planning to build a rubbish incinerator on a piece of the English countryside that is much loved and used by local residents.

Is government debt a problem? There are two parts to a question of government debt: 

EXPECTATIONS IN AS -  INFLATION We have already incorporated expectations of the price level into the model.

As we had seen, in the short and medium run fluctuations (shocks and policy changes) dominate. In the long-run capital accumulation and technological change dominates.

The openness of the economy has three distinct dimensions: 1. Openness in the goods market: Free trade restrictions include tariffs and quotas.

In the short run,  we had assumed that the expectations of prices are fixed in the short run but not in the medium run. In the short run price expectations can be wrong, in the medium run they cannot.

In the dynamic AD-AS model, we remove the assumption that the inflation rate, the expectation for the inflation rate and output growth are zero in the medium run. Additionally, we had assumed that there is no growth in the medium run.

Historically, one of the main reasons countries have borrowed abroad is to finance productive investments that would have been hard to finance out of domestic savings alone.

Intertemporal trade and Current Account balances (Model Without Investment)

In this model, the government has its objective to minimize the loss function given by,

A currency crisis is a type of financial crisis. It is a situation when there is serious doubt if the central banks have enough foreign exchange reserves to maintain the peg of the currency.

With increased world integration there was a need to study the transmission of policy in one part of the world to other country's.

The monetary model is better for a long run explanation of exchange rates. It assumes full employment with flexible prices. Furthermore, real income can be exogenously decided which determine the demand for real balances.

There are two main distortions in the New Keynesian model: 1. markups due to imperfect competition (leads to low employment in the long run): we assume that it is controlled by the fiscal authority.

NK model takes the RBC model backbone and adds to that the price stickiness. To incorporate price stickiness we assume that firms are price-setters and thus move away from the perfect competition assumption.

In our models so far we had assumed that agents live infinitely, which everybody knows is unrealistic. So, in this model attempt was made to relax this assumption.

Click here to view the concise self-made notes. 

T his plot of log Real GNP shows the growth of real GNP in time. What we see is that the GNP has grown smoothly and consistently on average (red line) however, with some fluctuations (blue line).