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.People used to go to the website and takes the advantage of low interest rates. 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. [...]
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. [...]
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. [...]
Wage inequality has increased in many economies in recent decades. Discuss the three leading hypotheses regarding the causes of this increase. What does the empirical evidence tell us about the quantitative importance of each of these factors?
The US economy has almost double since the 1970s, and labour productivity has risen over this period. Yet real wages for the median worker hasn’t changed much since the 1970s, and below-median male wages have fallen; showing that the increasing size of the economy hasn’t been fairly distributed.
The rise in inequality between high skilled and low skilled workers is particularly pronounced, with Autor finding that households which are composed of university education individuals earned $30,298 more than non-skilled workers in 1979, but this rose to $58,249 by 2012, an increase of 92%. [...]
Acemoglu, Johnson and Robinson (AJR) attempt to measure the effects of institutions on income differences by introducing an exogenous source of variation in institutions to measure their differing outcomes. They begin by pointing out that the history of colonisation resulted in different institutions being formed: some countries received extractive institutions (whereby the coloniser would simply extract all resources but would not build proper institutions to promote growth and sustainable living) whilst others received inclusive institutions. This depended upon the ability for colonisers to settle, if a country was full of disease then the coloniser would not wish to live in this colony, but simply take as many resources as possible and then leave. [...]
One of the fundamental questions of economics is why are some countries rich and others poor? Why do some countries experience heavy growth which allows them to catch-up with the economic giants of the world, whilst others are relegated to the bottom and are unable to jump on the growth train? Is it due to luck, geography, culture or institutional factors? This article explains some of the different theories of economic growth, beginning with the Solow growth model (neoclassical model), before criticising such a model and suggesting that endogenous growth models have more to tell us about the growth phenomenon. We highlights the pitfalls of each model, but conclude that the main reason that incomes are different between countries is due to institutional differences. [...]