曼昆宏观经济学第七版讲义4.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * What causes hyperinflation? Hyperinflation is caused by excessive money supply growth: When the central bank prints money, the price level rises. If it prints money rapidly enough, the result is hyperinflation. A few examples of hyperinflation country period CPI Inflation % per year M2 Growth % per year Israel 1983-85 338% 305% Brazil 1987-94 1256% 1451% Bolivia 1983-86 1818% 1727% Ukraine 1992-94 2089% 1029% Argentina 1988-90 2671% 1583% Dem. Republic of Congo / Zaire 1990-96 3039% 2373% Angola 1995-96 4145% 4106% Peru 1988-90 5050% 3517% Zimbabwe 2005-07 5316% 9914% Why governments create hyperinflation When a government cannot raise taxes or sell bonds, it must finance spending increases by printing money. In theory, the solution to hyperinflation is simple: stop printing money. In the real world, this requires drastic and painful fiscal restraint. The Classical Dichotomy Real variables: Measured in physical units – quantities and relative prices, for example: quantity of output produced real wage: output earned per hour of work real interest rate: output earned in the future by lending one unit of output today Nominal variables: Measured in money units, e.g., nominal wage: Dollars per hour of work. nominal interest rate: Dollars earned in future by lending one dollar today. the price level: The amount of dollars needed to buy a representative basket of goods. The Classical Dichotomy Note: Real variables were explained in Chap 3, nominal ones in Chapter 4. Classical dichotomy: the theoretical separation of real and nominal variables in the classical model, which implies nominal variables do not affect real variables. Neutrality of money: Changes in the money supply do not affect real variables. In the real world, money is approximately neutral in the long run. Chapter Summary Money def: the stock of assets used for transactions functions: medium of exc