Reply
Sat 16 Mar, 2013 04:39 pm
Hello,
am asking you Check to see if this is logical, true and correct computes
(1+ i)=(1+ ρ)(1+ π)
we have Fisher equation :
i=ρ+π+ρπ (1)
The FOC of firm's optimization problem in tax competition model of Zodrow and Mieszkowski (1986):
f'(k)= ρ+t (2)
On a :
ρ=i-π (3)
replace (3) in (2), we obtain :
f'(k)= i-π+t (4)
And replace (1) in (4), we obtain :
f'(k)=ρ+π+ρπ-π+t=ρ+ρπ+t=(1+π)ρ+t
⟹ f'(k)=(1+π)ρ+t (5)
Thank you
@kacius,
Quote:
i=ρ+π+ρπ (1)
ρ=i-π (3)
Sorry, the derivation isn't correct. (1) and (3) can't both be right.
@kacius,
While we're on the subject I might just add that rather than insult Irving Fisher by calling THIS the Fisher equation:
i=ρ+π
...they might just as well have called THIS the Fisher equation:
MV = PY