Labour matching models stem from the fact that when a worker becomes unemployed, he needs to look for a job and such a process is not instantaneous. He cannot simply occupy any vacancy, but has to search for a job in a certain area, in a certain profession and which matches a list of criteria such as wage, hours of work and subjective factors like “would I enjoy working here”. This all takes time and requires effort. Before such matching models were devised, economists assumed in their models that unemployment could instead be modelled by looking at the number of unemployed and the number of vacancies and then working out how many of the unemployed could take these vacancies. [...]
The credit channel is an enhancement mechanism for traditional monetary policy transmission, not a truly independent or parallel channel. Discuss
The traditional monetary policy transmission works through a number of conventional channels: interest rate effect, exchange rate effect, asset price effect and through expectations. The stance of monetary policy acts as a signal to firms and individuals about what the central bank thinks the future state of the economy will look like, and thus affects investment and spending decisions by agents now based on this. A higher interest rate could imply that the central bank thinks the economy is doing well, which may induce firms and consumers to spend more, because of this signal. [...]
Literally, social ontology is the study of social nature and it concerns itself with “how existents exist”1. It is the study of the social realm which includes the “domain of all phenomena, existents, properties”2 whose existence depends upon humans and their interactions. To paraphrase Little “almost all human action is social: socially oriented, socially embedded or socially constructed”6. So how can it be useful for illuminating the study of economics? If economics is the study of people, and how they interact to form markets, bargain with each other, and more generally interact economically, then we need to examine an economist’s worldview on how these interactions are governed. [...]
The debt-growth nexus has received renewed interest among academics and policy makers alike in the aftermath of the recent global financial crisis and the subsequent euro area sovereign debt crisis. Discuss whether there exists a tipping point, for public indebtedness, beyond which economic growth drops off significantly; and more generally, whether a build-up of public debt slows down the economy in the long run.
This essay explores the effects of debt on growth, by first examining the theoretical mechanisms that high debt can lead to lower growth before examining some of the empirical literature to see whether we observe such a relationship. [...]
In this article we explain the fundamental factors determining investment decisions of firms, which comprise the investment function. By determining the structure of the investment function we can hypothetically estimate this and thus predict how much a given firm ought to be investing, given economic fundamentals. This is interesting because we could then aggregate such functions – i.e. add up each firm-specific investment equation – to get a measure of what total investment by private firms in the economy ought to be investing. By comparing this amount with actual levels of investment we can derive a measure of the investment gap. [...]
The importance of accurate GDP data is often understated and there is a need to document carefully the extent of revisions to statistics on economic activity and evaluate how this affects macroeconomic policy as well as examine ways to improve statistical methods.
The Office for National Statistics (ONS) has a trade-off between providing estimates on measures of economic activity, such as GDP, quickly, but also accurately. Information sources used to calculate GDP often take up to three years to arrive, but policymakers need to know before this the state of the economy. As such, the ONS uses a fraction (44%) of the eventual data source to make first estimates of the GDP. [...]