萨尔瓦多国际经济学(第十版)英文课件ch16

1、Tenth EditionThe Price Adjustment Mechanism with Flexible and Fixed Exchange RatesDominick SalvatoreJohn Wiley & Sons, Inc.CHAPTER S I X T E E N1In this chapter:nIntroductionnAdjustment with Flexible Exchange RatesnEffect of Exchange Rate Changes on Domestic Prices and the Terms of TradenStability o

2、f Foreign Exchange MarketsnElasticities in the Real WorldnAdjustment Under the Gold System2IntroductionnAssumptionsnInternational private capital flows take place only as passive responses to cover temporary trade imbalances.nThe nation wants to correct a deficit in its current account by exchange r

3、ate changes.3Adjustment with Flexible Exchange RatesnPrice adjustment mechanism relies on depreciation and devaluation of currency to adjust current account and balance of payments.nIncome adjustment mechanism relies on income changes in the nation and abroad to make the adjustments.nElasticity of t

4、he demand and supply curves will determine effectiveness of adjustment mechanisms.4FIGURE 16-1 Balance-of-Payments Adjustments with Exchange Rate Changes.FIGURE 16-2 Derivation of the U.S. Demand and Supply Curves for Foreign Exchange.Effect of Exchange Rate Changes on Domestic Prices and the Terms

5、of SalenThe greater the devaluation or depreciation of the dollar, the greater its inflationary impact, and the less feasible is the increase of the exchange rate for correcting balance of payments deficits.7Effect of Exchange Rate Changes on Domestic Prices and the Terms of SalenDepreciation of the

6、 currency increases prices of both exports and imports in terms of domestic currency.nTerms of trade can rise, fall or remain unchanged, depending on the relative magnitude of the price changes.8Stability of Foreign Exchange MarketsnUnstable foreign exchange market - when a disturbance from equilibr

7、ium pushes the exchange rate further away from equilibrium.nSupply curve is negatively sloped and more elastic than the demand curve of foreign exchange.nFlexible exchange rate system increases (rather than reduces) a balance of payments disequilibrium.9Stability of Foreign Exchange MarketsnStable f

8、oreign exchange market - when a disturbance from equilibrium gives rise to automatic forces that push exchange rate back to equilibrium. nSupply curve is positively sloped, or if negatively sloped, is less elastic than the demand curve of foreign exchange.10FIGURE 16-3 Stable and Unstable Foreign Ex

9、change Markets.Stability of Foreign Exchange MarketsnMarshall-Lerner condition - Sum of the price elasticities of demand for imports and demand for exports is (in absolute terms) indicates degree of foreign exchange market stability:nGreater than 1 = stable foreign exchange marketnDevaluation requir

10、ed to correct BOP deficit.nLess than 1 = unstable foreign exchange marketnRevaluation required to correct BOP deficit.nEqual to 1 = change in exchange rate leaves balance of payments unchanged.12Elasticities in the Real WorldnEmpirical evidence suggests that the Marshall-Lerner condition holds for t

11、he foreign exchange market, indicating a stable market.nQuantity response to price change must be measured over longer time periods for accurate elasticity measures.13FIGURE 16-4 The Identification Problem.Elasticities in the Real WorldnJunz and Rhomberg (1973) identified five possible lags in quant

12、ity responses to price changes in international trade:1.Recognition lag before price change becomes evident.2.Decision lag to take advantage of price changes.3.Delivery lag of new orders placed4.Replacement lag to use up available inventories before placing new orders.5.Production lag to change outp

13、ut mix resulting from price changes.15Elasticities in the Real WorldnJ-Curve EffectnA nations trade balance may actually worsen soon after devaluation or depreciation before improving later on.nThis occurs because import prices tend to rise faster than export prices, with quantities initially not ch

14、anging much.nOver time, export prices catch up with import prices so initial deterioration in trade balance is reversed, generating a J-shaped pattern to exchange rate movements.16FIGURE 16-5 The J-Curve.Adjustment Under the Gold StandardnThe gold standard operated from about 1880 to outbreak of Wor

15、ld War I in 1914.nAttempt to reestablish gold standard after the war failed in 1931 during Great Depression.nAdvantages and disadvantages of gold standard also apply to fixed exchange system (Bretton Woods, or gold-exchange standard) operating from World War II until its collapse in 1971.18Adjustmen

16、t Under the Gold StandardnUnder the gold standard, each nation specified the gold content of its currency:n1 gold coin contained 113.0016 grains of goldn$1 gold coin contained 23.22 grains of goldnThis implies a fixed exchange rate, or mint parity, of: R = $/ = 113.0016 / 23.22 = $4.87/19Adjustment

17、Under the Gold StandardnThe cost of shipping gold from New York to London was approximately 3 cents.nSo, the actual exchange rate would always lie between $4.84/ (gold import point) and $4.90/ (gold export point).20Adjustment Under the Gold StandardnThe tendency of the dollar to depreciate (rise abo

18、ve gold export point) was countered by gold shipments from the United States.nGold outflows = size of U.S. balance of payments deficit.nThe tendency of the dollar to appreciate (fall below gold import point) was countered by gold shipments to the United States.nGold inflows = size of U.S. balance of

19、 payments surplus.21Adjustment Under the Gold StandardnThe price-specie-flow mechanism is the automatic adjustment mechanism under the gold standard.nIf a trade imbalance exists, gold will flow from the country with a trade deficit to the country with a trade surplus.nThe fall in gold supplies in th

20、e trade deficit country reduces its money supply and pushes its price level lower.nThe increase in gold supplies in the trade surplus country increases its money supply and raises its price level.22Adjustment Under the Gold StandardnThe price level movement is based on the quantity theory of money:

21、MV = PQ where M = money supply V = velocity of circulation of money P = general price index Q = physical output23Adjustment Under the Gold StandardnAs the price level falls in the country with a trade deficit, exports of its goods and services will be encouraged. nAs the price level increases in the country with a trade surplus, exports of its goods and services will be disco