Finance is riddled with terms that can make the uninitiated scratch their heads. "Real" variables and "nominal" variables are a good example. What's the difference? A nominal variable is one that doesn't incorp
The classical school of economics proposes that the real and nominal variables can be evaluated in isolation from each other. This idea is known as the classical dichotomy, which suggests that it is possible to analyze real variables without con...
Generally a real variable, such as the real interest rate, is one where the effects of inflation have been factored in. A nominal variable is one where the effects of inflation have not been accounted for. A few examples illustrate the difference: 1. Nominal Interest Rates vs. Real Interest...
Recent empirical studies have revealed that the convergence speeds of nominal and real variables are fairly different. This paper studies the temporal evolution of the mutual influence between the convergences of a nominal and of a real variable. It refers first to 蟽-convergence analysis. In ...
This result is robust to the consideration of alternative setups highlighted by the literature: a setup with elastic labour supply (endogenous leisure) and a setup in discrete time with a forward-looking interest-rate feedback rule (i.e., the nominal interest rate reacts to shifts in the ...
Related to Real versus nominal value:Nominal price Nominal dollars Dollars that are not adjusted forinflation. Copyright © 2012,Campbell R. Harvey. All Rights Reserved. Nominal Describing a variable that does not takeinflationinto account. For example, when consideringGDPgrowth, if GDP has grown...
nominal value: an economic statistic measured using actual market prices; i.e. nominal values are not adjusted for inflation; contrast with real value real-to-nominal formula: the nominal value of some economic variable (e.g. GDP) is the price level times the real value of that economic var...
and not nominal rates, fluctuations of the rate are absent any impacts of inflation. This same concept can be applied to prices (i.e. the cost of a banana in the year 2000 vs. every year since). The same analysis can be performed using nominal rates which introduces a material variable...
where Ddi is a time dummy variable (Ddi takes the value 1 if d = t and zero otherwise). For the NLSY measure of average hourly earnings, the controls Xti include only experience and experience squared. Because the experience variable is defined as maxage−6−schooling this is close to...
The variable t can be used as a subscript to show the value of a variable at different points in time. For example, if we denote income by Y and time is measured in years, then Yt is equal to the value of income in year t. If t = 0 in 2000, then Y0 is the value of income...