Analysis of tax effects on consolidated household/government debts of a nation in a monetary union under classical dichotomy

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Analysis of tax effects on consolidated household/government debts of a nation in a monetary union under classical dichotomy"

Transcription

1 MPRA Munich Personal RePEc Archive Analysis of ax effecs on consolidaed household/governmen debs of a naion in a moneary union under classical dichoomy Minseong Kim 8 April 016 Online a hps://mpra.ub.uni-muenchen.de/71016/ MPRA Paper No , posed 30 April :5 UTC

2 Analysis of ax effecs on consolidaed household/governmen debs of a naion in a moneary union under classical dichoomy Minseong Kim 016/04/8 Absrac Unlike many analysis of ax effecs on consolidaed household/governmen debs in a moneary union, his paper builds up analysis from a consolidaed budge consrain, insead of saring from a model. By a moneary union, i is assumed ha all naions in he union share same currency. if axes are assumed o be in real values, or if one assumes ha governmen arges real value of axes T/P, hen i is also possible o produce he size of fiscal muliplier on real value of consolidaed debs, if relaxed version of classical dichoomy - ha agens decisions are only affeced by real variables - is assumed. This paper argues ha size is db/d r = 1 where r is real value of axes or real axes and b = B/(P R) where B = D wih D nominal deb, P price and R 1 nominal ineres rae, or in erms of real debs, dd/d r = 1. 1 Budge Consrain Analysis A naion being analyzed is in a moneary union wih some oher naions. inside hese naions, here is no exchange rae mechanism. For simplificaion, here are only consumpion goods in an economy, wihou any capial goods. The naion faces he following consolidaed households/governmen budge consrain, assuming such an emergen budge consrain exiss: C + T + B R W N + Π + B 1 (1) where P is price level, C is consumpion, T is ne axes, W is nominal wage, R 1 is nominal ineres rae, Π is firms profis all disribued as dividends, X is ne expor. B is ne one-ime bond holding, wih B < 0 implying ne indebedness. I will be assumed ha he agens in he economy do no hold any bond for simplificaion purposes. I will be assumed for res of analysis ha T 0 wih assumpion of zero governmen spending. for simplificaion, 1

3 Analysis of ax effecs on household/governmen debs in a moneary union impor M will be assumed o be zero, and all naions are assumed o be in a moneary union. P > 0 for an obvious reason. B 1 is assumed o be given. Assuming ha he markes clear, W N + Π = (C + X ). Equaion 1 becomes wih equaliy: C + T + B R = (C + X ) + B 1 () T + B R = X + B 1 (3) Le us define b = B R. b = X + B 1 Define relaionships as in he Figure: T + B = X + B 1 (4) R T (5) b X P T The above diagram shows ha b = b(x, P, T ), X = X(P ), P = P (T ). The underlying idea is ha increase or decrease in axes affec P, expors are assumed o only depend on price of goods - which is a reasonable assumpion given ha all expor demands are honored, ha all naions are in a moneary union, and ha qualiy of goods or echnology does no suddenly improve solely by increasing axes, and inverse ne indebedness obviously depends on X, P, T. = X + + (6) X Recall Equaion 5: b = X + B 1 T

4 Analysis of ax effecs on household/governmen debs in a moneary union 3 = 1 (7) X = 1 (8) = B 1 P P + T (9) = B 1 dt P + T P + X P 1 (10) I is assumed ha X < 0 and for our ineress, T 0. < 0, > X 0. Real value of debs increase when axes are raised. If P < 0, P < 0, P a iniial X,, T, B, B 1. Then, db < < X a iniial X,, T, B, B 1. < 1. Then sill db < X a iniial X,, T, B, B 1. = 0, hen db > 1. Then, db > > 0, < X a iniial X,, T, B, B 1. Then, db < > 0, P > 0, P > X a iniial X,, T, B, B 1. < 1. Then sill db > X a iniial X,, T, B, B 1. Now, le us change Equaion 5 ino: > 1. Then, db > 0. b = X + B 1 r, (11) where r, = T /, real axes. b = b(x, P, r ), X = X(P ), P = P ( r ). = X + + (1) d r, X = 1 (13) X = 1 (14)

5 Analysis of ax effecs on household/governmen debs in a moneary union 4 = B 1 = B 1 d r, P + X (15) P 1 (16) Now I will inroduce a relaxed version of classical dichoomy. Even under many sicky-price models, price level iself is irrelevan, as long as some real variables remain adjused. Le new P n, = k. Then, one needs o adjus B 1, B and T o reflec he change. B n, 1 = kb 1, B n, = kb, T n, = kt, wih iniial equilibria adjused appropriaely. Bu r, does no change under price level ransformaion, and similarly b does no change. Le k. Then, Bn, 1 P n, Bu X 0. is invarian relaive o price level ransformaion. Then he problem appears: oo, hen db d r, hree choices: = X 1 (17) d r, is non-zero and finie whenever k 0,. If is finie no longer remains invarian relaive o price level ransformaion. P = all he ime = 0 all he ime X = all he ime If he second choice is made, d r, = 1 (18) The firs choice brings an ineresing conclusion: ha raising real axes explodes nominal value, and if he governmen cares also abou moneary/nominal sabiliy, hen real axes canno be se exogenously and hus are endogenous. The hird choice implies ha expors are exremely sensiive o price change. This can be expeced in an economy where every good is homogeneous and marke is perfecly compeiive. However, if any form of monopolisic compeiion exiss, hen he hird choice is likely no rue.

4. International Parity Conditions

4. International Parity Conditions 4. Inernaional ariy ondiions 4.1 urchasing ower ariy he urchasing ower ariy ( heory is one of he early heories of exchange rae deerminaion. his heory is based on he concep ha he demand for a counry's currency

More information

Economics Honors Exam 2008 Solutions Question 5

Economics Honors Exam 2008 Solutions Question 5 Economics Honors Exam 2008 Soluions Quesion 5 (a) (2 poins) Oupu can be decomposed as Y = C + I + G. And we can solve for i by subsiuing in equaions given in he quesion, Y = C + I + G = c 0 + c Y D + I

More information

11/6/2013. Chapter 14: Dynamic AD-AS. Introduction. Introduction. Keeping track of time. The model s elements

11/6/2013. Chapter 14: Dynamic AD-AS. Introduction. Introduction. Keeping track of time. The model s elements Inroducion Chaper 14: Dynamic D-S dynamic model of aggregae and aggregae supply gives us more insigh ino how he economy works in he shor run. I is a simplified version of a DSGE model, used in cuing-edge

More information

Chapter 6: Business Valuation (Income Approach)

Chapter 6: Business Valuation (Income Approach) Chaper 6: Business Valuaion (Income Approach) Cash flow deerminaion is one of he mos criical elemens o a business valuaion. Everyhing may be secondary. If cash flow is high, hen he value is high; if he

More information

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART TWO

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART TWO Profi Tes Modelling in Life Assurance Using Spreadshees, par wo PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART TWO Erik Alm Peer Millingon Profi Tes Modelling in Life Assurance Using Spreadshees,

More information

A Brief Introduction to the Consumption Based Asset Pricing Model (CCAPM)

A Brief Introduction to the Consumption Based Asset Pricing Model (CCAPM) A Brief Inroducion o he Consumpion Based Asse Pricing Model (CCAPM We have seen ha CAPM idenifies he risk of any securiy as he covariance beween he securiy's rae of reurn and he rae of reurn on he marke

More information

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments BALANCE OF PAYMENTS DATE: 2008-05-30 PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn + 46 8 506 944 09, lena.finn@scb.se Camilla Bergeling +46 8 506 942 06, camilla.bergeling@scb.se

More information

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas The Greek financial crisis: growing imbalances and sovereign spreads Heaher D. Gibson, Sephan G. Hall and George S. Tavlas The enry The enry of Greece ino he Eurozone in 2001 produced a dividend in he

More information

YTM is positively related to default risk. YTM is positively related to liquidity risk. YTM is negatively related to special tax treatment.

YTM is positively related to default risk. YTM is positively related to liquidity risk. YTM is negatively related to special tax treatment. . Two quesions for oday. A. Why do bonds wih he same ime o mauriy have differen YTM s? B. Why do bonds wih differen imes o mauriy have differen YTM s? 2. To answer he firs quesion les look a he risk srucure

More information

CVA calculation for CDS on super senior ABS CDO

CVA calculation for CDS on super senior ABS CDO MPRA Munich Personal RePEc Archive CVA calculaion for CDS on super senior AS CDO Hui Li Augus 28 Online a hp://mpra.ub.uni-muenchen.de/17945/ MPRA Paper No. 17945, posed 19. Ocober 29 13:33 UC CVA calculaion

More information

II.1. Debt reduction and fiscal multipliers. dbt da dpbal da dg. bal

II.1. Debt reduction and fiscal multipliers. dbt da dpbal da dg. bal Quarerly Repor on he Euro Area 3/202 II.. Deb reducion and fiscal mulipliers The deerioraion of public finances in he firs years of he crisis has led mos Member Saes o adop sizeable consolidaion packages.

More information

Chapter 7. Response of First-Order RL and RC Circuits

Chapter 7. Response of First-Order RL and RC Circuits Chaper 7. esponse of Firs-Order L and C Circuis 7.1. The Naural esponse of an L Circui 7.2. The Naural esponse of an C Circui 7.3. The ep esponse of L and C Circuis 7.4. A General oluion for ep and Naural

More information

Price elasticity of demand for crude oil: estimates for 23 countries

Price elasticity of demand for crude oil: estimates for 23 countries Price elasiciy of demand for crude oil: esimaes for 23 counries John C.B. Cooper Absrac This paper uses a muliple regression model derived from an adapaion of Nerlove s parial adjusmen model o esimae boh

More information

Present Value Methodology

Present Value Methodology Presen Value Mehodology Econ 422 Invesmen, Capial & Finance Universiy of Washingon Eric Zivo Las updaed: April 11, 2010 Presen Value Concep Wealh in Fisher Model: W = Y 0 + Y 1 /(1+r) The consumer/producer

More information

Optimal Investment and Consumption Decision of Family with Life Insurance

Optimal Investment and Consumption Decision of Family with Life Insurance Opimal Invesmen and Consumpion Decision of Family wih Life Insurance Minsuk Kwak 1 2 Yong Hyun Shin 3 U Jin Choi 4 6h World Congress of he Bachelier Finance Sociey Torono, Canada June 25, 2010 1 Speaker

More information

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation A Noe on Using he Svensson procedure o esimae he risk free rae in corporae valuaion By Sven Arnold, Alexander Lahmann and Bernhard Schwezler Ocober 2011 1. The risk free ineres rae in corporae valuaion

More information

The Grantor Retained Annuity Trust (GRAT)

The Grantor Retained Annuity Trust (GRAT) WEALTH ADVISORY Esae Planning Sraegies for closely-held, family businesses The Granor Reained Annuiy Trus (GRAT) An efficien wealh ransfer sraegy, paricularly in a low ineres rae environmen Family business

More information

Differential Equations. Solving for Impulse Response. Linear systems are often described using differential equations.

Differential Equations. Solving for Impulse Response. Linear systems are often described using differential equations. Differenial Equaions Linear sysems are ofen described using differenial equaions. For example: d 2 y d 2 + 5dy + 6y f() d where f() is he inpu o he sysem and y() is he oupu. We know how o solve for y given

More information

Two Compartment Body Model and V d Terms by Jeff Stark

Two Compartment Body Model and V d Terms by Jeff Stark Two Comparmen Body Model and V d Terms by Jeff Sark In a one-comparmen model, we make wo imporan assumpions: (1) Linear pharmacokineics - By his, we mean ha eliminaion is firs order and ha pharmacokineic

More information

Renewal processes and Poisson process

Renewal processes and Poisson process CHAPTER 3 Renewal processes and Poisson process 31 Definiion of renewal processes and limi heorems Le ξ 1, ξ 2, be independen and idenically disribued random variables wih P[ξ k > 0] = 1 Define heir parial

More information

INSTRUMENTS OF MONETARY POLICY*

INSTRUMENTS OF MONETARY POLICY* Aricles INSTRUMENTS OF MONETARY POLICY* Bernardino Adão** Isabel Correia** Pedro Teles**. INTRODUCTION A classic quesion in moneary economics is wheher he ineres rae or he money supply is he beer insrumen

More information

Chapter 8: Regression with Lagged Explanatory Variables

Chapter 8: Regression with Lagged Explanatory Variables Chaper 8: Regression wih Lagged Explanaory Variables Time series daa: Y for =1,..,T End goal: Regression model relaing a dependen variable o explanaory variables. Wih ime series new issues arise: 1. One

More information

Newton's second law in action

Newton's second law in action Newon's second law in acion In many cases, he naure of he force acing on a body is known I migh depend on ime, posiion, velociy, or some combinaion of hese, bu is dependence is known from experimen In

More information

Lecture 18. Serial correlation: testing and estimation. Testing for serial correlation

Lecture 18. Serial correlation: testing and estimation. Testing for serial correlation Lecure 8. Serial correlaion: esing and esimaion Tesing for serial correlaion In lecure 6 we used graphical mehods o look for serial/auocorrelaion in he random error erm u. Because we canno observe he u

More information

Debt Portfolio Optimization Eric Ralaimiadana

Debt Portfolio Optimization Eric Ralaimiadana Deb Porfolio Opimizaion Eric Ralaimiadana 27 May 2016 Inroducion CADES remi consiss in he defeasance of he Social Securiy and Healh public deb To achieve is ask, he insiuion has been assigned a number

More information

Analysis of Pricing and Efficiency Control Strategy between Internet Retailer and Conventional Retailer

Analysis of Pricing and Efficiency Control Strategy between Internet Retailer and Conventional Retailer Recen Advances in Business Managemen and Markeing Analysis of Pricing and Efficiency Conrol Sraegy beween Inerne Reailer and Convenional Reailer HYUG RAE CHO 1, SUG MOO BAE and JOG HU PARK 3 Deparmen of

More information

Vector Autoregressions (VARs): Operational Perspectives

Vector Autoregressions (VARs): Operational Perspectives Vecor Auoregressions (VARs): Operaional Perspecives Primary Source: Sock, James H., and Mark W. Wason, Vecor Auoregressions, Journal of Economic Perspecives, Vol. 15 No. 4 (Fall 2001), 101-115. Macroeconomericians

More information

Why Did the Demand for Cash Decrease Recently in Korea?

Why Did the Demand for Cash Decrease Recently in Korea? Why Did he Demand for Cash Decrease Recenly in Korea? Byoung Hark Yoo Bank of Korea 26. 5 Absrac We explores why cash demand have decreased recenly in Korea. The raio of cash o consumpion fell o 4.7% in

More information

Phillips Curve. Macroeconomics Cunningham

Phillips Curve. Macroeconomics Cunningham Phillips Curve Macroeconomics Cunningham Original Phillips Curve A. W. Phillips (1958), The Relaion Beween Unemploymen and he Rae of Change of Money Wage Raes in he Unied Kingdom, 1861-1957, Economica.

More information

A Further Examination of Insurance Pricing and Underwriting Cycles

A Further Examination of Insurance Pricing and Underwriting Cycles A Furher Examinaion of Insurance ricing and Underwriing Cycles AFIR Conference, Sepember 2005, Zurich, Swizerland Chris K. Madsen, GE Insurance Soluions, Copenhagen, Denmark Svend Haasrup, GE Insurance

More information

A Mathematical Description of MOSFET Behavior

A Mathematical Description of MOSFET Behavior 10/19/004 A Mahemaical Descripion of MOSFET Behavior.doc 1/8 A Mahemaical Descripion of MOSFET Behavior Q: We ve learned an awful lo abou enhancemen MOSFETs, bu we sill have ye o esablished a mahemaical

More information

9. Capacitor and Resistor Circuits

9. Capacitor and Resistor Circuits ElecronicsLab9.nb 1 9. Capacior and Resisor Circuis Inroducion hus far we have consider resisors in various combinaions wih a power supply or baery which provide a consan volage source or direc curren

More information

INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS

INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS Ilona Tregub, Olga Filina, Irina Kondakova Financial Universiy under he Governmen of he Russian Federaion 1. Phillips curve In economics,

More information

Graphing the Von Bertalanffy Growth Equation

Graphing the Von Bertalanffy Growth Equation file: d:\b173-2013\von_beralanffy.wpd dae: Sepember 23, 2013 Inroducion Graphing he Von Beralanffy Growh Equaion Previously, we calculaed regressions of TL on SL for fish size daa and ploed he daa and

More information

Basic Assumption: population dynamics of a group controlled by two functions of time

Basic Assumption: population dynamics of a group controlled by two functions of time opulaion Models Basic Assumpion: populaion dynamics of a group conrolled by wo funcions of ime Birh Rae β(, ) = average number of birhs per group member, per uni ime Deah Rae δ(, ) = average number of

More information

Diagnostic Examination

Diagnostic Examination Diagnosic Examinaion TOPIC XV: ENGINEERING ECONOMICS TIME LIMIT: 45 MINUTES 1. Approximaely how many years will i ake o double an invesmen a a 6% effecive annual rae? (A) 10 yr (B) 12 yr (C) 15 yr (D)

More information

Morningstar Investor Return

Morningstar Investor Return Morningsar Invesor Reurn Morningsar Mehodology Paper Augus 31, 2010 2010 Morningsar, Inc. All righs reserved. The informaion in his documen is he propery of Morningsar, Inc. Reproducion or ranscripion

More information

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613.

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613. Graduae School of Business Adminisraion Universiy of Virginia UVA-F-38 Duraion and Convexiy he price of a bond is a funcion of he promised paymens and he marke required rae of reurn. Since he promised

More information

Interest rates, house prices and the purchasing power for housing 1

Interest rates, house prices and the purchasing power for housing 1 Enhr Conference 2011 5-8 July, Toulouse Ineres raes, house prices and he purchasing power for housing 1 Frank Vasmans Cenre for Economic Sudies, Universiy of Leuven (K.U.Leuven) e-mail: Frank.Vasmans@econ.kuleuven.ac.be

More information

Task is a schedulable entity, i.e., a thread

Task is a schedulable entity, i.e., a thread Real-Time Scheduling Sysem Model Task is a schedulable eniy, i.e., a hread Time consrains of periodic ask T: - s: saring poin - e: processing ime of T - d: deadline of T - p: period of T Periodic ask T

More information

The dynamic new-keynesian model

The dynamic new-keynesian model Chaper 4 The dynamic new-keynesian model A leas since Keynes, i has been hough ha in order o have real e ecs from moneary acions, i is key o have some degree of nominal rigidiy. The quesion we wan o explore

More information

International Risk Sharing: Through Equity Diversification or Exchange Rate Hedging?

International Risk Sharing: Through Equity Diversification or Exchange Rate Hedging? WP/09/38 Inernaional Risk Sharing: Through Equiy Diversificaion or Exchange Rae Hedging? Charles Engel and Akio Masumoo 2009 Inernaional Moneary Fund WP/09/38 IMF Working Paper Research Deparmen Inernaional

More information

CRISES AND THE FLEXIBLE PRICE MONETARY MODEL. Sarantis Kalyvitis

CRISES AND THE FLEXIBLE PRICE MONETARY MODEL. Sarantis Kalyvitis CRISES AND THE FLEXIBLE PRICE MONETARY MODEL Saranis Kalyviis Currency Crises In fixed exchange rae regimes, counries rarely abandon he regime volunarily. In mos cases, raders (or speculaors) exchange

More information

Longevity 11 Lyon 7-9 September 2015

Longevity 11 Lyon 7-9 September 2015 Longeviy 11 Lyon 7-9 Sepember 2015 RISK SHARING IN LIFE INSURANCE AND PENSIONS wihin and across generaions Ragnar Norberg ISFA Universié Lyon 1/London School of Economics Email: ragnar.norberg@univ-lyon1.fr

More information

How much depreciation of the US dollar for sustainability of the current accounts?

How much depreciation of the US dollar for sustainability of the current accounts? How much depreciaion of he US dollar for susainabiliy of he curren accouns? Eiji Ogawa and Taeshi Kudo Firs version: May 27, 2004 This version: June 6, 2004 This paper is prepared for a conference of he

More information

Chapter 9 Bond Prices and Yield

Chapter 9 Bond Prices and Yield Chaper 9 Bond Prices and Yield Deb Classes: Paymen ype A securiy obligaing issuer o pay ineress and principal o he holder on specified daes, Coupon rae or ineres rae, e.g. 4%, 5 3/4%, ec. Face, par value

More information

Graduate Macro Theory II: Notes on Neoclassical Growth Model

Graduate Macro Theory II: Notes on Neoclassical Growth Model Graduae Macro Theory II: Noes on Neoclassical Growh Model Eric Sims Universiy of Nore Dame Spring 2011 1 Basic Neoclassical Growh Model The economy is populaed by a large number of infiniely lived agens.

More information

MOTION ALONG A STRAIGHT LINE

MOTION ALONG A STRAIGHT LINE Chaper 2: MOTION ALONG A STRAIGHT LINE 1 A paricle moes along he ais from i o f Of he following alues of he iniial and final coordinaes, which resuls in he displacemen wih he larges magniude? A i =4m,

More information

HOW SHOULD MONETARY POLICY RESPOND TO CHANGES IN THE RELATIVE PRICE OF OIL? CONSIDERING SUPPLY AND DEMAND SHOCKS

HOW SHOULD MONETARY POLICY RESPOND TO CHANGES IN THE RELATIVE PRICE OF OIL? CONSIDERING SUPPLY AND DEMAND SHOCKS HOW SHOULD MONETARY POLICY RESPOND TO CHANGES IN THE RELATIVE PRICE OF OIL? CONSIDERING SUPPLY AND DEMAND SHOCKS MICHAEL PLANTE RESEARCH DEPARTMENT WORKING PAPER 1202 Federal Reserve Bank of Dallas HOW

More information

Steps for D.C Analysis of MOSFET Circuits

Steps for D.C Analysis of MOSFET Circuits 10/22/2004 Seps for DC Analysis of MOSFET Circuis.doc 1/7 Seps for D.C Analysis of MOSFET Circuis To analyze MOSFET circui wih D.C. sources, we mus follow hese five seps: 1. ASSUME an operaing mode 2.

More information

I. Basic Concepts (Ch. 1-4)

I. Basic Concepts (Ch. 1-4) (Ch. 1-4) A. Real vs. Financial Asses (Ch 1.2) Real asses (buildings, machinery, ec.) appear on he asse side of he balance shee. Financial asses (bonds, socks) appear on boh sides of he balance shee. Creaing

More information

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Profi Tes Modelling in Life Assurance Using Spreadshees PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Erik Alm Peer Millingon 2004 Profi Tes Modelling in Life Assurance Using Spreadshees

More information

The basic Solow model

The basic Solow model The basic Solow model The basic Solow model... 3 Learning Goals:...3 2.1. Inroducion...3 2.2. The Solow model...4 The neo-classical producion funcion...4 Box 2.1 Consan reurns o scale...6 Main assumpions

More information

Math 201 Lecture 12: Cauchy-Euler Equations

Math 201 Lecture 12: Cauchy-Euler Equations Mah 20 Lecure 2: Cauchy-Euler Equaions Feb., 202 Many examples here are aken from he exbook. The firs number in () refers o he problem number in he UA Cusom ediion, he second number in () refers o he problem

More information

Cointegration: The Engle and Granger approach

Cointegration: The Engle and Granger approach Coinegraion: The Engle and Granger approach Inroducion Generally one would find mos of he economic variables o be non-saionary I(1) variables. Hence, any equilibrium heories ha involve hese variables require

More information

One dictionary: Native language - English/English - native language or English - English

One dictionary: Native language - English/English - native language or English - English Faculy of Social Sciences School of Business Corporae Finance Examinaion December 03 English Dae: Monday 09 December, 03 Time: 4 hours/ 9:00-3:00 Toal number of pages including he cover page: 5 Toal number

More information

Network Effects, Pricing Strategies, and Optimal Upgrade Time in Software Provision.

Network Effects, Pricing Strategies, and Optimal Upgrade Time in Software Provision. Nework Effecs, Pricing Sraegies, and Opimal Upgrade Time in Sofware Provision. Yi-Nung Yang* Deparmen of Economics Uah Sae Universiy Logan, UT 84322-353 April 3, 995 (curren version Feb, 996) JEL codes:

More information

Lecture 12 Assumption Violation: Autocorrelation

Lecture 12 Assumption Violation: Autocorrelation Major Topics: Definiion Lecure 1 Assumpion Violaion: Auocorrelaion Daa Relaionship Represenaion Problem Deecion Remedy Page 1.1 Our Usual Roadmap Parial View Expansion of Esimae and Tes Model Sep Analyze

More information

Working Paper Monetary aggregates, financial intermediate and the business cycle

Working Paper Monetary aggregates, financial intermediate and the business cycle econsor www.econsor.eu Der Open-Access-Publikaionsserver der ZBW Leibniz-Informaionszenrum Wirschaf The Open Access Publicaion Server of he ZBW Leibniz Informaion Cenre for Economics Hong, Hao Working

More information

What is the natural interest rate?

What is the natural interest rate? Wha is he naural ineres rae? Henrik Lundvall and Andreas Wesermark The auhors work a he Moneary Policy Deparmen, Sveriges Riksbank. Wha real ineres rae should a cenral bank aim for if i wishes o aain a

More information

WHAT ARE OPTION CONTRACTS?

WHAT ARE OPTION CONTRACTS? WHAT ARE OTION CONTRACTS? By rof. Ashok anekar An oion conrac is a derivaive which gives he righ o he holder of he conrac o do 'Somehing' bu wihou he obligaion o do ha 'Somehing'. The 'Somehing' can be

More information

Impact of Debt on Primary Deficit and GSDP Gap in Odisha: Empirical Evidences

Impact of Debt on Primary Deficit and GSDP Gap in Odisha: Empirical Evidences S.R. No. 002 10/2015/CEFT Impac of Deb on Primary Defici and GSDP Gap in Odisha: Empirical Evidences 1. Inroducion The excessive pressure of public expendiure over is revenue receip is financed hrough

More information

Money and Monetary Policy in a Kaldor-Pasinetti-Sraffa-Keynes Framework

Money and Monetary Policy in a Kaldor-Pasinetti-Sraffa-Keynes Framework Money and Moneary Policy in a Kaldor-Pasinei-Sraffa-Keynes Framework Peer Dochery School of Finance and Economics Universiy of Technology, Sydney Absrac This paper invesigaes he role of money and he ransmission

More information

Equities: Positions and Portfolio Returns

Equities: Positions and Portfolio Returns Foundaions of Finance: Equiies: osiions and orfolio Reurns rof. Alex Shapiro Lecure oes 4b Equiies: osiions and orfolio Reurns I. Readings and Suggesed racice roblems II. Sock Transacions Involving Credi

More information

Debt Accumulation, Debt Reduction, and Debt Spillovers in Canada, 1974-98*

Debt Accumulation, Debt Reduction, and Debt Spillovers in Canada, 1974-98* Deb Accumulaion, Deb Reducion, and Deb Spillovers in Canada, 1974-98* Ron Kneebone Deparmen of Economics Universiy of Calgary John Leach Deparmen of Economics McMaser Universiy Ocober, 2000 Absrac Wha

More information

Why Do Real and Nominal. Inventory-Sales Ratios Have Different Trends?

Why Do Real and Nominal. Inventory-Sales Ratios Have Different Trends? Why Do Real and Nominal Invenory-Sales Raios Have Differen Trends? By Valerie A. Ramey Professor of Economics Deparmen of Economics Universiy of California, San Diego and Research Associae Naional Bureau

More information

Follow links Class Use and other Permissions. For more information, send to:

Follow links Class Use and other Permissions. For more information, send  to: COPYRIGHT NOTICE: David A. Kendrick, P. Ruben Mercado, and Hans M. Amman: Compuaional Economics is published by Princeon Universiy Press and copyrighed, 2006, by Princeon Universiy Press. All righs reserved.

More information

Representing Periodic Functions by Fourier Series. (a n cos nt + b n sin nt) n=1

Representing Periodic Functions by Fourier Series. (a n cos nt + b n sin nt) n=1 Represening Periodic Funcions by Fourier Series 3. Inroducion In his Secion we show how a periodic funcion can be expressed as a series of sines and cosines. We begin by obaining some sandard inegrals

More information

Inductance and Transient Circuits

Inductance and Transient Circuits Chaper H Inducance and Transien Circuis Blinn College - Physics 2426 - Terry Honan As a consequence of Faraday's law a changing curren hrough one coil induces an EMF in anoher coil; his is known as muual

More information

Mathematics in Pharmacokinetics What and Why (A second attempt to make it clearer)

Mathematics in Pharmacokinetics What and Why (A second attempt to make it clearer) Mahemaics in Pharmacokineics Wha and Why (A second aemp o make i clearer) We have used equaions for concenraion () as a funcion of ime (). We will coninue o use hese equaions since he plasma concenraions

More information

Name: Algebra II Review for Quiz #13 Exponential and Logarithmic Functions including Modeling

Name: Algebra II Review for Quiz #13 Exponential and Logarithmic Functions including Modeling Name: Algebra II Review for Quiz #13 Exponenial and Logarihmic Funcions including Modeling TOPICS: -Solving Exponenial Equaions (The Mehod of Common Bases) -Solving Exponenial Equaions (Using Logarihms)

More information

Monopoly versus Competition in Banking: Some Implications for Growth and Welfare

Monopoly versus Competition in Banking: Some Implications for Growth and Welfare Monopoly versus Compeiion in Banking: Some Implicaions for Growh and Welfare Bearix Paal Bruce Smih Ke Wang January 22, 2005 Absrac We consider how he indusrial organizaion of he financial sysem affecs

More information

The Real Business Cycle paradigm. The RBC model emphasizes supply (technology) disturbances as the main source of

The Real Business Cycle paradigm. The RBC model emphasizes supply (technology) disturbances as the main source of Prof. Harris Dellas Advanced Macroeconomics Winer 2001/01 The Real Business Cycle paradigm The RBC model emphasizes supply (echnology) disurbances as he main source of macroeconomic flucuaions in a world

More information

CHARGE AND DISCHARGE OF A CAPACITOR

CHARGE AND DISCHARGE OF A CAPACITOR REFERENCES RC Circuis: Elecrical Insrumens: Mos Inroducory Physics exs (e.g. A. Halliday and Resnick, Physics ; M. Sernheim and J. Kane, General Physics.) This Laboraory Manual: Commonly Used Insrumens:

More information

Rotational Inertia of a Point Mass

Rotational Inertia of a Point Mass Roaional Ineria of a Poin Mass Saddleback College Physics Deparmen, adaped from PASCO Scienific PURPOSE The purpose of his experimen is o find he roaional ineria of a poin experimenally and o verify ha

More information

Monetary and Fiscal Policy Interactions with Debt Dynamics

Monetary and Fiscal Policy Interactions with Debt Dynamics Moneary and Fiscal Policy Ineracions wih Deb Dynamics Sefano Gnocchi and Luisa Lamberini Preliminary and Incomplee November, 22 Absrac We analyze he ineracion beween commied moneary and discreionary fiscal

More information

4 Convolution. Recommended Problems. x2[n] 1 2[n]

4 Convolution. Recommended Problems. x2[n] 1 2[n] 4 Convoluion Recommended Problems P4.1 This problem is a simple example of he use of superposiion. Suppose ha a discree-ime linear sysem has oupus y[n] for he given inpus x[n] as shown in Figure P4.1-1.

More information

Real Business Cycles Theory

Real Business Cycles Theory Real Business Cycles Theory Research on economic flucuaions has progressed rapidly since Rober Lucas revived he profession s ineres in business cycle heory. Business cycle heory is he heory of he naure

More information

BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015. All officiell statistik finns på: www.scb.se Statistikservice: tfn 08-506 948 01

BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015. All officiell statistik finns på: www.scb.se Statistikservice: tfn 08-506 948 01 RKET BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015 All officiell saisik finns på: www.scb.se Saisikservice: fn 08-506 948 01 All official saisics can be found a: www.scb.se Saisics service, phone +46

More information

1. The graph shows the variation with time t of the velocity v of an object.

1. The graph shows the variation with time t of the velocity v of an object. 1. he graph shows he variaion wih ime of he velociy v of an objec. v Which one of he following graphs bes represens he variaion wih ime of he acceleraion a of he objec? A. a B. a C. a D. a 2. A ball, iniially

More information

Stochastic Optimal Control Problem for Life Insurance

Stochastic Optimal Control Problem for Life Insurance Sochasic Opimal Conrol Problem for Life Insurance s. Basukh 1, D. Nyamsuren 2 1 Deparmen of Economics and Economerics, Insiue of Finance and Economics, Ulaanbaaar, Mongolia 2 School of Mahemaics, Mongolian

More information

The Lucas Asset Pricing Model

The Lucas Asset Pricing Model c January 0, 206, Chrisopher D. Carroll The Lucas Asse Pricing Model LucasAssePrice 0. Inroducion/Seup Lucas 978 considers an economy populaed by infiniely many idenical individual consumers, in which

More information

Monetary Conservatism and Fiscal Policy 1

Monetary Conservatism and Fiscal Policy 1 Moneary Conservaism and Fiscal Policy Klaus Adam 2 Robero M. Billi 3 Sepember 2008 We hank Marina Azzimoni, Helge Berger, V.V. Chari, Gaui Eggersson, Jordi Galí, Alber Marce, Ramon Marimon, Chris Waller,

More information

PRICE VOLATILITY ON THE USD/JPY MARKET AS A MEASURE OF INVESTORS ATTITUDE TOWARDS RISK

PRICE VOLATILITY ON THE USD/JPY MARKET AS A MEASURE OF INVESTORS ATTITUDE TOWARDS RISK QUANTITATIVE METHODS IN ECONOMICS Vol. XI, No. 1, 010, pp. 37-44 PRICE VOLATILITY ON THE USD/JPY MARKET AS A MEASURE OF INVESTORS ATTITUDE TOWARDS RISK Kaarzyna Banasiak Deparmen of Economics of Agriculure

More information

Interest Rates, Inflation, and Federal Reserve Policy Since 1980. Peter N. Ireland * Boston College. March 1999

Interest Rates, Inflation, and Federal Reserve Policy Since 1980. Peter N. Ireland * Boston College. March 1999 Ineres Raes, Inflaion, and Federal Reserve Policy Since 98 Peer N. Ireland * Boson College March 999 Absrac: This paper characerizes Federal Reserve policy since 98 as one ha acively manages shor-erm nominal

More information

Small Menu Costs and Large Business Cycles: An Extension of Mankiw Model *

Small Menu Costs and Large Business Cycles: An Extension of Mankiw Model * Small enu Coss an Large Business Ccles: An Exension of ankiw oel * Hirana K Nah Deparmen of Economics an Inl. Business Sam Houson Sae Universi an ober Srecher Deparmen of General Business an Finance Sam

More information

The option pricing framework

The option pricing framework Chaper 2 The opion pricing framework The opion markes based on swap raes or he LIBOR have become he larges fixed income markes, and caps (floors) and swapions are he mos imporan derivaives wihin hese markes.

More information

State Machines: Brief Introduction to Sequencers Prof. Andrew J. Mason, Michigan State University

State Machines: Brief Introduction to Sequencers Prof. Andrew J. Mason, Michigan State University Inroducion ae Machines: Brief Inroducion o equencers Prof. Andrew J. Mason, Michigan ae Universiy A sae machine models behavior defined by a finie number of saes (unique configuraions), ransiions beween

More information

Forecasting Sales: A Model and Some Evidence from the Retail Industry. Russell Lundholm Sarah McVay Taylor Randall

Forecasting Sales: A Model and Some Evidence from the Retail Industry. Russell Lundholm Sarah McVay Taylor Randall Forecasing Sales: A odel and Some Evidence from he eail Indusry ussell Lundholm Sarah cvay aylor andall Why forecas financial saemens? Seems obvious, bu wo common criicisms: Who cares, can we can look

More information

Optimal Monetary Policy When Lump-Sum Taxes Are Unavailable: A Reconsideration of the Outcomes Under Commitment and Discretion*

Optimal Monetary Policy When Lump-Sum Taxes Are Unavailable: A Reconsideration of the Outcomes Under Commitment and Discretion* Opimal Moneary Policy When Lump-Sum Taxes Are Unavailable: A Reconsideraion of he Oucomes Under Commimen and Discreion* Marin Ellison Dep of Economics Universiy of Warwick Covenry CV4 7AL UK m.ellison@warwick.ac.uk

More information

The Time Value of Money

The Time Value of Money THE TIME VALUE OF MONEY CALCULATING PRESENT AND FUTURE VALUES Fuure Value: FV = PV 0 ( + r) Presen Value: PV 0 = FV ------------------------------- ( + r) THE EFFECTS OF COMPOUNDING The effecs/benefis

More information

A Probability Density Function for Google s stocks

A Probability Density Function for Google s stocks A Probabiliy Densiy Funcion for Google s socks V.Dorobanu Physics Deparmen, Poliehnica Universiy of Timisoara, Romania Absrac. I is an approach o inroduce he Fokker Planck equaion as an ineresing naural

More information

Supply Chain Management Using Simulation Optimization By Miheer Kulkarni

Supply Chain Management Using Simulation Optimization By Miheer Kulkarni Supply Chain Managemen Using Simulaion Opimizaion By Miheer Kulkarni This problem was inspired by he paper by Jung, Blau, Pekny, Reklaii and Eversdyk which deals wih supply chain managemen for he chemical

More information

The Causes of Recent Inflation in Vietnam: Evidence from a. VAR with Sign Restrictions

The Causes of Recent Inflation in Vietnam: Evidence from a. VAR with Sign Restrictions The Causes of Recen Inflaion in Vienam: Evidence from a VAR wih Sign Resricions Tuan Khai Vu Faculy of Economics, Seikei Universiy Firs version: Jan,. This version: May,. (Preliminary. Commens are welcome.)

More information

What is a swap? A swap is a contract between two counter-parties who agree to exchange a stream of payments over an agreed period of several years.

What is a swap? A swap is a contract between two counter-parties who agree to exchange a stream of payments over an agreed period of several years. Currency swaps Wha is a swap? A swap is a conrac beween wo couner-paries who agree o exchange a sream of paymens over an agreed period of several years. Types of swap equiy swaps (or equiy-index-linked

More information

... t t t k kt t. We assume that there are observations covering n periods of time. Autocorrelation (also called

... t t t k kt t. We assume that there are observations covering n periods of time. Autocorrelation (also called Supplemen 13B: Durbin-Wason Tes for Auocorrelaion Modeling Auocorrelaion Because auocorrelaion is primarily a phenomenon of ime series daa, i is convenien o represen he linear regression model using as

More information

MTH6121 Introduction to Mathematical Finance Lesson 5

MTH6121 Introduction to Mathematical Finance Lesson 5 26 MTH6121 Inroducion o Mahemaical Finance Lesson 5 Conens 2.3 Brownian moion wih drif........................... 27 2.4 Geomeric Brownian moion........................... 28 2.5 Convergence of random

More information

International Trade and the Connection Between Excess Demand and Inflation by. Albert S. Dexter Maurice D. Levi and Barrie R. Nault* October 10, 2002

International Trade and the Connection Between Excess Demand and Inflation by. Albert S. Dexter Maurice D. Levi and Barrie R. Nault* October 10, 2002 Inernaional Trade and he Connecion Beween Excess Demand and Inflaion by Alber S. Dexer Maurice D. Levi and Barrie R. Naul* Ocober 10, 2002 * Dexer and Levi: Professors of Commerce and Business Adminisraion,

More information

Fair games, and the Martingale (or "Random walk") model of stock prices

Fair games, and the Martingale (or Random walk) model of stock prices Economics 236 Spring 2000 Professor Craine Problem Se 2: Fair games, and he Maringale (or "Random walk") model of sock prices Sephen F LeRoy, 989. Efficien Capial Markes and Maringales, J of Economic Lieraure,27,

More information

Cannibalization and Product Life Cycle Management

Cannibalization and Product Life Cycle Management Middle-Eas Journal of Scienific Research 19 (8): 1080-1084, 2014 ISSN 1990-9233 IDOSI Publicaions, 2014 DOI: 10.5829/idosi.mejsr.2014.19.8.11868 Cannibalizaion and Produc Life Cycle Managemen Ali Farrukh

More information