Category Archives: Macroeconomics

Tobin’s q-Investment Theory

In the 60s and 70s, economists including Nicholas Kaldor and James Tobin came up with an alternative investment theory: the q-investment theory, sometimes also referred to as Tobin’s q-investment theory. At its core, Tobin’s q theory of investment relates fluctuations … Continue reading

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The Neoclassical Theory of Investment

Dale W. Jorgenson contributed to the development and understanding on the neoclassical investment theory. In the following post I will try to outline and discuss the neoclassical investment theory in simply words. At its heart, Jorgenson’s investment model bases on … Continue reading

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General Principles for Specifying a Dynamic General Equilibrium Model

The Dynamic General Equilibrium Model (DGE) is characterized by various features. Firstly, a DGE is dynamic, which means that it considers an economy over time. Second, it considers a general economy, which implies that the modelled economy is fully specified. … Continue reading

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Capital Adjustment Costs

Understanding investment activity in an economy is not trivial. The erratic nature of firm level investment activity is somewhat of a mystery to me and it took me quite some time to get a vague idea of what could be … Continue reading

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Balance Statistic

The following article tries to explain the Balance Statistic sometimes referred to as Saldo or Saldo Statistic. It is used as a quantification method for qualitative survey question. The benefit of applying the Balance Statistic arises when the survey is … Continue reading

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Log-Linearizing What exactly is happening when we linearize a model? Well, the answer is simple, we basically approximate non-linear equations with linear once. In context of macroeconomics we may have models which are non-linear. Thus in order to solve them there is … Continue reading

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Rational Expectations

Rational Expectations When talking about rational expectations all of us know immediately what we mean, this was my belief until some months ago. However it seems to me that many people have a vague idea about the concept, but they … Continue reading

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