(7)-Pugel-16e-Chapter22外汇市场国际金融

Chapter22:HowDoestheOpenMacroeconomyWork?PerformanceofaNationalEconomyInternalBalanceActualdomesticproductionclosetotheeconomy’spotential,oftensummarizedasfullemployment(anacceptablylowunemploymentrate)Pricestability(anacceptablylowinflationrate)ExternalBalanceSustainablecompositionofthecountry’sbalanceofpaymentswiththerestoftheworldUsefulindicator:Officialsettlementsbalanceapproximatelyequaltozero(sothatthecountryisnotlosingofficialinternationalreservesoracquiringunwantedofficialinternationalreserves)

©2016McGraw-HillEducation.AllRightsReserved.2AFrameworkforMacroeconomicAnalysisOurmodelanalyzestheeconomyintheshortrun,whenpricesare“sticky”andslowtorespondtovariousdemandshocks,suchaschangesinthemoneysupply.Beyondtheshortrun,thepriceleveldoesrespondtodemandandsupplyshocks.Thismeansthattheamountofinflationthecountryexperienceseventuallydependsontherateofgrowthofthecountry’smoneysupply.Inaddition,theeconomytendstowardfullemploymentinthelongrun.©2016McGraw-HillEducation.AllRightsReserved.3DomesticProductionDependsonAggregateDemandIntheshortrun,domesticproduction(producers’willingnesstoproduce)isdeterminedbydemand.Equilibriumoccurswhendomesticproduction(Y,orrealGDP)equalsdesiredaggregatedemand(AD)fordomesticallyproducedgoodsandservices:Y=AD=C+Id+G+(X–M)whereC=domesticconsumption,Id=planneddomesticrealinvestment,G=governmentspending,X=exports,andM=imports©2016McGraw-HillEducation.AllRightsReserved.4DomesticProductionandUnemploymentThelevelofactualdomesticproductionorrealGDP(relativetotheeconomy’spotentialproductionorrealGDP)tendstobecloselyrelatedtotheeconomy’sunemploymentrate

inthelabormarket.©2016McGraw-HillEducation.AllRightsReserved.5AggregateDemandConsumptionexpendituredependsondomesticincome(Y) C=C(Y)Realprivatedomesticinvestmentisnegativelyrelatedtothelevelofinterestrates,i,intheeconomy

Id

=Id(i)Governmentspendingongoodsandservicesispartoffiscalpolicy,determinedbypoliticalprocess,andassumedtobeexogenous

G=G0Nationalexpenditureongoodsandservices:

E=C+Id+G©2016McGraw-HillEducation.AllRightsReserved.6TradeDependsonRealGDP

©2016McGraw-HillEducation.AllRightsReserved.7EquilibriumDomesticProductionEquilibrium:Y=AD(Y)=C+Id+G+(X–M)

=E+(X–M)Theequilibriumrelationshipcanbewrittenas Y–C–G=Id+X–Mwheretheleft-hand-sidemeasuresnationalsavingsS=Y–C–GSoequilibriumis:

S=Id+X–MorS-

Id

=X–M©2016McGraw-HillEducation.AllRightsReserved.8EquilibriumDomesticProductioninanOpenEconomy©2016McGraw-HillEducation.AllRightsReserved.9

TheSpendingMultiplierinaSmallOpenEconomy

©2016McGraw-HillEducation.AllRightsReserved.10ForeignSpilloversandForeign-IncomeRepercussionsIfacountryisasmallcountry,itschangesinimportswillnotanymeasurableimpactonworldtrade(anyfollow-oneffectswillbenegligible).If,instead,thecountryislarge,thenthesefollow-onorspillovereffectscanbeimportantintwoways.Changesinproductionandincomeofalargecountryhavespillovereffectsonproductionandincomeinothercountries.Thechangesinforeignincomesalterforeignpurchasesofthefirstcountry’sexports.©2016McGraw-HillEducation.AllRightsReserved.11ForeignTradeandIncomeRepercussionsStartingfromaRiseinOurSpending©2016McGraw-HillEducation.AllRightsReserved.12ForeignSpilloversandForeign-IncomeRepercussionsThemoreourcountry’simportsaffectforeignincomes,andthemoreforeigncountrieshaveapropensitytoimportfromourcountry,themoreourtruespendingmultiplierexceedsthesimpleformulamultiplier1/(s+m)Theexistenceofforeignspilloversandforeign-incomerepercussionsexplainsthecross-countrycorrelationofnationalbusinesscycles.©2016McGraw-HillEducation.AllRightsReserved.13ForeignSpilloversofChangesinDomesticProductandIncome©2016McGraw-HillEducation.AllRightsReserved.14AMoreCompleteFramework:ThreeMarketsThreetypesofmarketsDomesticproductmarketMoneymarketForeignexchangemarketEndogenousvariablesDomesticproduct,YInterestrate,iExogenousforcesFiscalpolicyMonetarypolicyInternationallendingManyothers©2016McGraw-HillEducation.AllRightsReserved.15AnOverviewoftheMacromodelofanOpenEconomy©2016McGraw-HillEducation.AllRightsReserved.16TheDomesticProductMarketTheIScurveshowsallcombinationsofdomesticproductionlevelsandinterestratesforwhichthedomesticproductmarketisinequilibrium.Theequilibriumconditioncanbeexpressedintwoways:Y=C(Y)+Id(i)+G+(X–M(Y))S(Y)=Id(i)+X–M(Y)©2016McGraw-HillEducation.AllRightsReserved.17TheISCurve:EquilibriumsintheDomesticProductMarket©2016McGraw-HillEducation.AllRightsReserved.18TheMoneyMarketTheLMcurveshowsallcombinationsofproductionlevelsandinterestratesforwhichthemoneymarketisinequilibrium,giventhemoneysupply,thepricelevel,andthemoneydemandfunction.Thedemandfor(nominal)money(L)ispositivelyrelatedtonominalGDPandnegativelyrelatedtothelevelofinterestratesavailableonotherfinancialassets:TheequilibriumbetweenmoneysupplyMSandmoneydemandisthen:©2016McGraw-HillEducation.AllRightsReserved.19TheLMCurve:EquilibriumsintheMoneyMarket©2016McGraw-HillEducation.AllRightsReserved.20TheForeignExchangeMarket(orBalanceofPayments)TheFEcurveshowsallcombinationsofproductionlevelsandinterestratesinacountrythatresultinazerovalueforthecountry’sofficialsettlementsbalance.Theofficialsettlementsbalance,B,equalsthecurrentaccountbalance,CA

(approximatelyequaltonetexports),plusfinancialaccountbalance,FA:©2016McGraw-HillEducation.AllRightsReserved.21TheFECurve:BalanceofPaymentEquilibriums©2016McGraw-HillEducation.AllRightsReserved.22TheThreeMarketsTogetherBringingthethreemarketstogether,theeconomywillgravitatetowardasimultaneousequilibriuminthedomesticproductmarketandthemoneymarketIfIS-LMintersectstotheleftof(orabove)theFEcurve,thecountry’sofficialsettlementbalanceisinsurplus(B>0)IfIS-LMintersectsontheFEcurve,thecountry’sofficialsettlementbalanceiszero(B=

0)IfIS-LMintersectstotherightof(orbelow)theFEcurve,thecountry’sofficialsettlementbalanceisindeficit(B˂0)©2016McGraw-HillEducation.AllRightsReserved.23ThreeMarketsTogetherIfthecountryoperatesunderafixedexchangerateregime,thenanydivergencebetweentheIS-LMintersectionandtheFEcurveshowsthatofficialinterventionisneededtodefendthefixedexchangerateIfthecountryoperatesunderacleanlyfloatingexchangerateregime,thentheofficialsettlementbalancemustbezero,andtheIS,LMandtheFEcurveswillintersectatthesamepoint.