andInterestRates宏观经济学-加州大学-詹姆斯·

1、CHAPTER 10Investment, Net Exports, and Interest Rates1QuestionsHow are the determinants of investment different in a sticky-price than in a flexible-price model?How are the determinants of net exports different in a sticky-price than in a flexible-price model?How do changes in interest rates affect

2、the equilibrium level of production and income in a sticky-price model?2QuestionsWhat is the “IS Curve”?What use is it?What determines the equilibrium level of real GDP when the central banks policy is to keep the real interest rate constant?3The Importance of InvestmentChanges in investment are the

3、 driving force behind the business cyclereductions in investment have played a powerful role in every recession and depressionincreases in investment have spurred every boom4The Importance of InvestmentUnderstanding the causes and consequences of changes in investment will help us to understand busi

4、ness cycles5Figure 10.1 - Investment as a Share of Real GDP, 1970-20006The Role of InvestmentIn the flexible-price model, the real interest rate is a market-clearing priceit is pushed up or down by supply and demand to equate the flow of savings to the flow of investment7The Role of InvestmentIn the

5、 sticky-price model, the interest rate is not set in the loanable funds marketit is set directly by the central bank or indirectly by the combination of the stock of money and the liquidity preferences of households and businessesbusinesses match the quantity they produce to aggregate demandautomati

6、cally creates balance in the financial market8Fluctuations in InvestmentFluctuations in investment have two sourceschanges in the real interest rateshifts in investors expectations about future growth, profits, and risk9Investment and theInterest RateThe opportunity cost of an investment project is

7、the real interest ratethe higher the interest rate, the lower the number and value of investment projects that will return more than their current cost and the lower the level of investment spending10Investment and theInterest RateThe interest rate that is relevant for determining investment spendin

8、g is a long-term interest ratewhen considering an investment project, a manager must compare the potential profits of the project to the opportunity to make money from a long-term commitment of the funds elsewhere11Investment and theInterest RateLong-term and short-term interest rates are different

9、and do not always move in steplong-term interest rates are usually higher than short-term interest ratesthe term premium is the premium in the interest rate that the market charges on long-term loans vis-vis short term loans12Figure 10.2 - Bond Yield Curves13Investment and theInterest RateThe intere

10、st rate that is relevant for investment spending decisions is the real interest rate14Figure 10.3 - Gaps between Real and Nominal Interest Rates15Investment and theInterest RateThe interest rate that a firm faces is the interest rate charged to risky borrowersthe premium that lenders charge for loan

11、s to companies rather than to safe government borrowers is called the risk premium16Figure 10.4 - The Risk Premium: Safe and Risky Interest Rates17Investment and theInterest RateIn the investment function the relevant interest rate (r) is the long-term, real, risky interest rateAs r rises, the level

12、 of investment spending will decline18Figure 10.5 - Investment as a Decreasing Function of the Long-Term, Real,Risky Interest Rate19Exports and Autonomous SpendingGross exports depend onforeign total incomes (Yf)the real exchange rate ()the real exchange rate depends on the domestic real interest ra

13、te (r)Like investment, gross exports are affected by changes in the real interest rate20Exports and Autonomous SpendingA higher interest rate reduces autonomous spending (A) by reducing exports (Xr r) as well as by reducing investment (Ir r)21Exports and theInterest RateA higher real interest rate r

14、educes gross exportsinvesting in the home country is more attractiveforeign exchange speculators shift their portfolio holdings to include more home currency-denominated assetsthe exchange rate fallsexports are more expensive to foreigners22Figure 10.6 - From the Real Interest Rate to the Change in

15、Exports23Autonomous Spending and the Real Interest RateA one-percentage-point increase in the real interest rate (r) reduces autonomous spending by (Ir + Xr)24Figure 10.7 - Autonomous Spending as a Function of the Real Interest Rate25The Investment-Saving(IS) CurveBecause a change in the real intere

16、st rate changes autonomous spending, it will change the equilibrium level of real GDPthe effect will be equal to the interest sensitivity of autonomous spending (Ir + Xr) times the multiplier26The Investment-Saving(IS) CurveThe relationship between the level of the real interest rate and the equilib

17、rium level of real GDP is the IS curveIS stands for “Investment-Saving”27The Investment-Saving(IS) CurveTo find a point on the IS curve:pick a value for the real interest rate and determine the level of autonomous spending at that interest rateuse the income-expenditure diagram to determine the equi

18、librium level of real GDPRepeat this procedure to find other points on the IS curve28Figure 10.8 - The IS Curve29The IS CurveDefine baseline autonomous spending (A0) to include the determinants of autonomous spending that do not depend on the real interest rate30The IS CurveRecall that real GDP is e

19、qual to autonomous spending (A) divided by (1-MPE)Substituting, we get31The IS CurveThe term on the left is the horizontal intercept of the IS curvethe value of equilibrium real GDP if the real interest rate was equal to zeroThe term on the right is the slope of the IS curvethe responsiveness of rea

20、l GDP to changes in the interest rate32Figure 10.9 - The IS Curve33The Slope of the IS CurveThe first term is the multiplier (1/1-MPE)The second term shows how large a change in investment or exports is generated by a change in the real interest rate34The Position of the IS CurveThe position of the

21、IS curve depends on the baseline level of autonomous spending times the multiplierChanges in any of these determinants will shift the position of the IS curve35Figure 10.10 - A Change in Fiscal Policy and the Position of the IS Curve36Changes in the Interest RateTo calculate how much a change in the

22、 interest rate will shift the equilibrium level of real GDP, you need to know four things:the marginal propensity to spend (MPE)the interest sensitivity of investment (Ir)the interest sensitivity of the exchange rate (r)the exchange rate sensitivity of exports (X)37Moving to the IS CurveIf the econo

23、my is above the IS curve:real GDP planned expenditureinventories risefirms cut productionemployment, real GDP, and national income fallIf the economy is below the IS curve:planned expenditure real GDPinventories fallfirms expand productionemployment, real GDP, and national income rise38Figure 10.11

24、- Off of the IS Curve39Shifting the IS CurveTwo kinds of government policies directly affect the position of the IS curvea shift in tax rates changes both the position and the slope of the IS curvea change in the level of government purchases changes the position of the IS curve40Shifting the IS Cur

25、veExample - an increase in government spendingG = $200 billionMPE = 0.5Ir = $0.11Xr = $0.015r = 4%41Moving along the IS CurveChanges in the real interest rate will move the economy along the IS curvea higher real interest rate will produce a lower level of aggregate demand and equilibrium real GDPa

26、lower real interest rate will produce a higher level of aggregate demand and equilibrium real GDP42Moving along the IS CurveExample - cutting interest rates to boost equilibrium real GDP by $500 billionMPE = 0.5Ir = $0.11X = 5%r = $0.003To boost real GDP by $500 billion, the real interest rate must

27、fall by 2 percentage points43Figure 10.12 - Cutting Target Interest Rates and Raising Real GDP44Changing Interest RatesThe Federal Reserve controls interest rates through open market operationsbuying and selling short-term government bonds for cash45Open Market OperationsWhen the Federal Reserve buy

28、s government bondsthe total cash in the hands of the public and bank reserves increaseshouseholds, businesses, and banks find that they are holding more money than they would likeuse the money to buy assets (such as bonds)bond prices rise and interest rates fall46Open Market OperationsWhen the Feder

29、al Reserve sells government bondsthe total cash in the hands of the public and bank reserves decreaseshouseholds, businesses, and banks find that they are holding less money than they would liketry to get money by selling assets (such as bonds)bond prices fall and interest rates rise47Figure 10.13 -

30、 Open Market Operations48DifficultiesOur knowledge of the structure of the economy is imperfectEven when policies have their expected effects, these effects do not necessarily arrive on scheduleThe interest rates the Federal Reserve can control are short-term, nominal, safe interest rates49The IS Cu

31、rve of the 1960sIn the 1960s, there was a rightward shift in the IS curveincreased optimism on the part of businessesa cut in income taxesextra government expenditures (Vietnam War)50Figure 10.14 - Real GDP and the Interest Rate, 1960-199951The IS Curve of the 1960sIn the late 1960s, there was a mov

32、ement down along the IS curve as real interest rates declinedthe drop in real interest rates was caused (in part) by an increase in inflation52Figure 10.15 - Shifting Out and Moving along the IS Curve, 1960s53The IS Curve of theLate 1970sFrom 1977 to 1979, the U.S. economy moved down and to the righ

33、t of the IS curvethe expansion toward potential output was accompanied by high and rising inflationIn 1979, the Federal Reserve began fighting inflationraised real interest rates from 1979 to 198254Figure 10.16 - Moving along the IS Curve, Late 1970s55The IS Curve of the 1980sThe 1980s began with a

34、large outward shift in the IS curvean increase in military spendinga cut in income taxesan increase in investor optimismThe Federal Reserve responded to this shift by raising real interest rates56Figure 10.17 - Shifting the IS Curve Out, Early 1980s57The IS Curve of the 1980sAs inflation remained lo

35、w through the mid- and late- 1980s, Federal Reserve policymakers gained confidencebegan reducing real interest rates causing a movement along the IS curve58Figure 10.18 - Moving along the IS Curve, Late 1980s59The IS Curve of the 1990sIn the second half of 1990, there was a leftward shift of the IS

36、curvea drop in investment as firms worried about the price of oil after the Iraqi invasion of KuwaitThe Federal Reserve took no steps to reduce real interest rates to offset the recession60The IS Curve of the 1990sIn 1993, the Federal Reserve began a policy of maintaining lower interest rates in res

37、ponse to the reduction in the federal budget deficitthe goal of the policy was to increase investmentDuring the last half of the 1990s, interest rates remained lowInflation remained low as well61Figure 10.19 - The Recession of 1990-199262Chapter SummaryIn the sticky-price model, the investment function is the same as in the flexible-price modelin the flexible price model, the level of savings determined investment and the investment func