TestMagic

philecon · 05-20-2008, 08:31 AM

Hi, I have two questions about some economics classes. First off, the economics department at my school is offering a special topics course on incomplete markets. Before I try to enlist in this class, I'd like to know what incomplete markets is all about. Also, do you need matrix algebra to be able to understand undergraduate econometrics? I was able to enlist into an undergraduate econometrics class, and I'm a bit apprehensive about taking it. Thanks!

asianeconomist · 05-20-2008, 11:09 AM

You'll need matrix algebra for instance in deriving the OLS estimators for standard linear regression model. I do not know to which depth your course will go, but in typical UGrad texts (Gujrati, Wooldridge) the matrix algebra required is not very complex and can be picked up during the course. However, you do need to take a Linear Algebra course.

TruDog · 05-20-2008, 01:20 PM

The general idea of incomplete markets is that there is not an Arrow-Debreu security available for each state of the world. That has the effect of lowering the equilibrium interest rate to Beta*(1+r)<1, which suggests that there is precautionary saving due to the lack of complete markets and the inability to entirely diversify away 'excess' risk.

Truman Bewley at Yale and the late S. Rao Aiyagari are two leaders in the field of incomplete markets. Aiyagari's paper Uninsured Idiosyncratic Risk and Aggregate Saving (incomplete markets and econometrics, anyone?) is a good introduction to the topic.

TruDog · 05-20-2008, 01:21 PM

Double post.

05-20-2008, 08:31 AM	#1 (permalink)
philecon Trying to make mom and pop proud Join Date: Mar 2008 Posts: 8	incomplete markets and econometrics, anyone? Hi, I have two questions about some economics classes. First off, the economics department at my school is offering a special topics course on incomplete markets. Before I try to enlist in this class, I'd like to know what incomplete markets is all about. Also, do you need matrix algebra to be able to understand undergraduate econometrics? I was able to enlist into an undergraduate econometrics class, and I'm a bit apprehensive about taking it. Thanks!

05-20-2008, 01:20 PM	#3 (permalink)
TruDog Within my grasp! Join Date: Aug 2006 Location: Midwest US Posts: 496	The general idea of incomplete markets is that there is not an Arrow-Debreu security available for each state of the world. That has the effect of lowering the equilibrium interest rate to Beta*(1+r)<1, which suggests that there is precautionary saving due to the lack of complete markets and the inability to entirely diversify away 'excess' risk. Truman Bewley at Yale and the late S. Rao Aiyagari are two leaders in the field of incomplete markets. Aiyagari's paper Uninsured Idiosyncratic Risk and Aggregate Saving (incomplete markets and econometrics, anyone?) is a good introduction to the topic. _ _ _ _ SIG _ _ _ _ Attending University of Wisconsin-Madison

05-20-2008, 01:21 PM	#4 (permalink)
TruDog Within my grasp! Join Date: Aug 2006 Location: Midwest US Posts: 496	Double post. _ _ _ _ SIG _ _ _ _ Attending University of Wisconsin-Madison Last edited by TruDog : 05-20-2008 at 01:21 PM. Reason: Double post.

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode

05-20-2008, 11:09 AM	#2 (permalink)
asianeconomist Loving the game Join Date: Jul 2007 Location: Where the grass is greener Posts: 673	You'll need matrix algebra for instance in deriving the OLS estimators for standard linear regression model. I do not know to which depth your course will go, but in typical UGrad texts (Gujrati, Wooldridge) the matrix algebra required is not very complex and can be picked up during the course. However, you do need to take a Linear Algebra course.

TestMagic

Free GMAT, GRE, SAT Test, TOEFL practice tests