第十二章开放经济中的总需求分析.pptVIP

* The result that income rises when the risk premium rises seems counter-intuitive and inaccurate. This slide explains why the increase in the risk premium may cause other things to occur that prevent income from rising, and may even cause income to fall. * Mexico’s central bank had maintained a fixed exchange rate with the U.S. dollar at about 29 cents per peso. * In the week before Christmas 1994, the central bank abandoned the fixed exchange rate, allowing the peso’s value to “float.” Then, in just one week, the peso lost nearly 40% of its value, and fell further during the following months. * The purpose of this slide is to motivate the topic. Even though this occurred in another country some years ago, it was very important for the U.S. The parents of many of your students probably held Mexican assets (indirectly through mutual funds in their 401k accounts and pension funds, which viewed Mexico very favorably prior to the crisis) and took losses when the crisis occurred. * When the last line displays, it might be helpful to note that, from Mexico’s viewpoint, the U.S. interest rate is r*. * We have already seen why an increase in a country’s risk premium causes its exchange rate to fall. One could also use the M-F model to show that an increase in r* also causes the exchange rate to fall. The intuition is as follows: An increase in foreign interest rates causes capital outflows: investors shift some of their funds out of the country to take advantage of higher returns abroad. This capital outflow causes the exchange rate to fall as it implies an increase in the supply of the country’s currency in the foreign exchange market. * Defending the peso in the face of large capital outflows was draining the reserves of Mexico’s central bank. (August 17, 1994 was the date of the presidential election.) Ask your students if they can figure out why Mexico’s central bank didn’t tell anybody it was running out of reserves. The answer: I