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Conversely, an economic or financial policy is called countercyclical if it works against the cyclical tendencies in the economy. That is, countercyclical policies are ones that cool down the economy when it is in an upswing, and stimulate the economy when it is in a downturn. [7]
The exchange rate disconnect puzzle: The exchange rate disconnect puzzle, also one of the so-called real exchange rate puzzles, concerns the weak short-term feedback link between exchange rates and the rest of the economy. In most economies, the exchange rate is the most important relative price, so it is surprising, and thus far unexplained ...
Download as PDF; Printable version; ... Pages in category "Economic puzzles" ... List of unsolved problems in economics
In economics, a puzzle is a situation where the implication of theory is inconsistent with observed economic data. An example is the equity premium puzzle, which relates to the fact that over the last two hundred years, the risk premium of stocks over bonds has been around 5.5%, much larger than expected from theory. The equity premium puzzle ...
The flow of money is shown with purple, and the flow of goods and services is shown with orange. Money flows in the opposite direction from goods and services. [1] Basic diagram of the circular flow of income. The functioning of the free-market economic system is represented with firms and households and interaction back and forth. [2]
Maurice Obstfeld and Kenneth Rogoff identify this as one of the six major puzzles in international economics. [2] The others are the home bias in trade puzzle, the equity home bias puzzle, the consumption correlations puzzle, the purchasing power and exchange rate disconnect puzzle, and the Baxter–Stockman neutrality of exchange rate regime ...
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A vicious circle (or cycle) is a complex chain of events that reinforces itself through a feedback loop, with detrimental results. [1] It is a system with no tendency toward equilibrium (social, economic, ecological, etc.), at least in the short run. Each iteration of the cycle reinforces the previous one, in an example of positive feedback. A ...