Policy宏观经济学-加州大学-詹姆斯·布拉德福特·

1、CHAPTER 13Stabilization PolicyQuestionsWhat principles should guide stabilization policy?What aspects of stabilization policy do economists argue about today?Is monetary policy or fiscal policy more effective as a stabilization policy?How does uncertainty affect the way stabilization policy should b

2、e made?QuestionsHow long are lags associated with stabilization policy?Is it better for stabilization policy to be conducted according to fixed rules or to be conducted by authorities with substantial discretion?Government PolicyThere are two kinds of government policyfiscal policyshifts the IS curv

3、emonetary policyshifts the LM curveThe government uses policy to stabilize the macroeconomy by minimizing the impact of shocksMonetary Policy InstitutionsMonetary policy in the U.S. is made by the Federal Reserve which is the central bankthe principal policy-making body of the Federal Reserve system

4、 is the Federal Open Market Committee (FOMC)the FOMC lowers and raises interest rates and increases and decreases the money supplyMonetary Policy InstitutionsThe Federal Reserve has a central office and 12 regional officesthe central office is the Board of Governors in Washington, DCthe 12 regional

5、offices are the 12 Federal reserve banks scattered around the U.S.the members of the Board of Governors and the Presidents of the regional Federal Reserve Banks make up the FOMCFigure 13.1 - Structure of the FederalReserve SystemFigure 13.2 - Composition of the Federal Open Market CommitteeMonetary

6、Policy InstitutionsThe FOMC meets approximately once a month to set interest ratesemergency meetings can also be scheduled on short noticeWhen the FOMC decides on a policy change, it is implemented immediatelyit takes only minutes for interest rates to shift in response to FOMC actionsMonetary Polic

7、y InstitutionsThe FOMC changes interest rates by carrying out open-market operationsin an expansionary open-market operation, the Federal Reserve buys government bonds, increasing bank reserves, and lowering interest ratesin a contractionary open-market operation, the Federal Reserve sells governmen

8、t bonds, decreasing bank reserves, and raising interest ratesMonetary Policy InstitutionsThe Federal Reserve can also alter interest rates in two other waysthe Board of Governors can alter legally required bank reservesthe Board of Governors can lend money directly to financial institutionsThese too

9、ls are used very rarelyFiscal Policy InstitutionsFiscal policy in the U.S. is managed by Congressthe Congress creates the tax laws that determine the amount of taxes imposed by the federal governmentthe Congresss spending bills determine the level of government purchasesTax and spending levels are s

10、et through a process called the budget cycleFigure 13.4 - The Budget ProcessGovernment ExpendituresMandatory expenditures include spending for Social Security, Medicare, Medicaid, unemployment insurance, and food stampsDiscretionary expenditures must be appropriated each year by Congressthese includ

11、e defense spending, NASA, highway spending, education spending, and so forth Figure 13.5 - Major Federal Government Expenditures by Category, 1960-2000Figure 13.6 - Federal Government Discretionary Spending, Excluding Defense (2000)Fiscal Policy InstitutionsBecause of the way the budget process is s

12、et up, making fiscal policy in the U.S. is complicated and time-consumingthe time between when a policy proposal is made and when it becomes effective (the inside lag) can take yearsthe inside lag associated with monetary policy changes can be measured in days or weeksThe History of Economic PolicyT

13、he Employment Act of 1946established Congresss Joint Economic Committee and the Presidents Council of Economic Advisorscalled on the President to estimate and forecast the current and future level of economic activity in the U.S.announced that it was the responsibility of the federal government to f

14、oster and promote free enterprise and the general welfareThe History of Economic PolicyBefore the Great Depression, the general belief was that the government could not stabilize the economy and should not try to do soIt was largely due to the writings of John Maynard Keynes that economists and poli

15、ticians became convinced that governments could halt depressions and smooth out the business cycleThe History of Economic PolicyBecause of the low and stable inflation and unemployment rates of the 1960s, economists and politicians thought that the business cycle was deadHowever, in the 1970s, expec

16、ted inflation rose and the Phillips curve shifted upthe result was stagflationFigure 13.7 - The U.S. Phillips Curve(s), 1955-1980The History of Economic PolicyBy the end of the 1970s, many economists were convinced that active monetary policy did more harm than goodthey argued that the U.S. would be

17、 better off with an “automatic” monetary policy one idea is to fix the money stock to a stable long-run growth paththe instability of velocity has reduced the number of advocates of this policyFigure 13.8 - The Velocity of Money before 1980The Power and Limits of Stabilization PolicyEconomists today

18、 have varied views as to how the central bank and fiscal authorities should manage the economysome (such as Milton Friedman) feel that activist attempts to manage the economy are likely to do more harm than goodsome believe that the appropriate government policy can do a lot to stabilize the economy

19、 after shocks occurThe Power and Limits of Stabilization PolicyEven the most activist of economists recognize the limits of stabilization policystabilization policy requires us to know where the economy is and where it is goinguse large-scale macroeconomic models to forecast the futuresearch for lea

20、ding indicatorsthe level of the stock market is often usedThe Lucas CritiqueExpectations of the future affect decision-making in the presentRobert Lucas argued that, because expectations of the future include expectations of government policies, if policies are changed the structure of the economy m

21、ay change as welleconomic models from the past may not be useful in forecasting the future effects of policyLeading IndicatorsThe index of leading indicators contains ten componentsThe leading indicator that has been most closely watched is the money supplythere are four measures of the money supply

22、 (M1, M2, M3, and L)these four monetary aggregates do not behave in the same wayFigure 13.9 - Different Measures of the Money Stock Behave DifferentlyThe Money MultiplierOpen market operations change the monetary basethe effects on the money supply are less direct and less certainChanges in the mone

23、tary base cause changes in the money supply through a process called the money multiplier ()The Money MultiplierThe money multiplier can be affected by the the currency-to-deposits ratio that households and businesses keep and the level of excess reserves held by banks(curr/dep)=currency-to-deposits

24、 ratio(req/dep)=ratio of required reserves(exc/dep)=excess reserves-to-depositsFigure 13.10 - Changes in the Currency-to-Deposits RatioLong Lags & Variable EffectsEven with reliable forecasts, changes in policy affect the economy with long lags and have variable effectsChanges in interest rates take

25、 time to affect investment, aggregate demand, and real GDPThe level of GDP today is determined by what long-run risky interest rates existed more than a year and a half agoMonetary vs. Fiscal PolicyAt the end of the World War II era, most economists and policy makers believed that the principal stab

26、ilization policy tool would be fiscal policyToday, the overwhelming consensus is that monetary policy has proven itself to be faster acting and more reliable than fiscal policyMonetary vs. Fiscal PolicyFiscal policy takes a longer amount of time to workdelays due to the political processThis means t

27、hat the Federal Reserve can neutralize the effects of any change in fiscal policy on aggregate demandswings in tax laws and appropriations have little effect on real GDP unless the Federal Reserve wishes them toAutomatic StabilizersAutomatic stabilizers include tax collections and social transfer pr

28、ograms such as food stamps and unemployment insuranceThese work without new policies having to be created and therefore can moderate the business cycle much more quickly than can discretionary policyHow Monetary Policy WorksMonetary policy takes time to work as wellthe Federal Open Market Committee

29、must first recognize that there is a problem and then formulate a policywhile changes in interest rates will occur almost immediately, it takes over a year for changes in interest rates to change national output and unemploymentHow Monetary Policy WorksThe Federal Reserve can either target real inte

30、rest rates or keep the money stock growing smoothlyif the principal instability in the economy is a shifting IS curve, targeting interest rates will not stabilize the economyif the instability in the economy occurs because money demand is unstable or because the currency-to-deposits and the reserves

31、-to-deposits ratios vary, then targeting interest rates is wiserRules vs. AuthoritiesShould monetary policy be conducted “automatically” according to rules or should it be left to the discretion of authorities?the first reason for automatic rules is that we fear that the people appointed to authorit

32、ies will be incompetentthe second reason for fixed rules is that authorities might not have the right objectivespolitical business cycleFigure 13.11 - The Politically-Influenced Business Cycle: Relative Growth in the Second Year of Presidential TermsCentral Bank IndependenceResearch has suggested th

33、at the more independent a central bank, the better its performancemore independent central banks presided over lower average inflation and less variable inflationcountries with independent banks did not have higher unemployment rates, lower real GDP growth, or larger business cyclesFigure 13.12 - In

34、flation and Central Bank Insulation from PoliticsCredibility & CommitmentIn the short run, pursuing a more expansionary monetary policy can seem to have great benefitshigher real GDP, lower unemployment, little impact on inflationIn the long run, however, a central bank is wiser to keep low inflatio

35、n as its top prioritykeeps expected inflation low and maintains credibilityCredibility & CommitmentEconomists call this conflict between short-run and long-run interests dynamic inconsistencysome economists have argued that this is another reason to have a fixed set of rules for monetary policyother

36、s believe that central banks are concerned with their long-term reputation and will resist the temptation to make inflation and money growth higher than expectedModern Monetary PolicyWhat guidelines for monetary policy should the central bank follow?Economists believe that the central bank should no

37、t target real economic variables such as the growth rate of real GDP or the unemployment ratethese are determined in the long run by the growth of potential output and the natural rate of unemploymentPolicies which target nominal variables will work betterModern Monetary PolicyThe Taylor rule provid

38、es a policy proposal for the central bankthe central bank chooses a target for the inflation rate and then raises interest rates when inflation is above and lowers interest rates when inflation is below this targetFinancial CrisesThe Federal Reserve has other important tools that can be used to try

39、to stem depressionsdeposit insurance insulates bank depositors from the effects of financial crisesif a financial crisis is severe enough, the Federal Reserve will act as a lender of last resortFinancial CrisesA financial crisis sees investors as a group suddenly become convinced that their investme

40、nts have become overly riskythey try to exchange their investments for relatively safe, liquid assetsinterest rates spike upwardinvestment can fall sharply sending the economy into a depressionFinancial CrisesIn a financial crisis, the Federal Reserve can do a lot of good by rapidly expanding the mo

41、ney supply to keep interest rates from rising sharplyThe Federal Reserve can also reduce the chance of a financial crisis occurring by doing a good job as the supervisor and regulator of the banking systemLender of Last ResortThe Federal Reserve can also help by lending directly to institutions that

42、 are fundamentally solvent but are temporarily illiquidit can do harm if it bails out institutions that have gone bankrupt because that encourages other institutions to take excessive risks hoping that the central bank will bail them out in the futureDeposit InsuranceOne of the reforms of the New De

43、al was the institution of deposit insurance by the Federal Deposit Insurance Corporationfederal deposit insurance acts as a monetary automatic stabilizereliminates the risk of keeping funds in a bankthe availability of deposit insurance creates moral hazardbanks may decide to make risky high-interes

44、t loansChapter SummaryMacroeconomic policy should attempt to stabilize the economy: to avoid extremes of high unemployment and of high and rising inflationLong and variable lags make stabilization policy extremely difficultChapter SummaryEconomists arrange themselves along a spectrum, with some advo

45、cating more aggressive management of the economy and others concentrating on establishing a stable framework and economic environmentcompared to differences of opinion among economists in the past, differences of opinion today are minorChapter SummaryIn todays environment, monetary policy is the stabilization to