Macro13 Open Economy Macroeconomics宏观经济学(南开大学,龚刚).pptVIP

Macroeconomics Lecture 13 Open Economy Macroeconomics Introduction Objectives Study how macroeconomic variables are determined in an open economy by introducing the Mundell-Fleming model. Study how macroeconomic policy can be applied to an open economy. Discuss the issue of the choice of exchange rate system, and relate this to RMB’s exchange rate. Introduction Some basic concepts Openness Opening in product market Opening in financial market Opening in factor market Introduction Some basic concepts (continued) Exchange rate Nominal exchange rate (E) — the value of RMB per unit of dollar. Real exchange rate (e) where P is the domestic price level and Pf the foreign price level Introduction Some basic concepts (continued) Exchange rate system Fixed exchange rate system Floating exchange rate system Manageable floating exchange rate system Mundell-Fleming Model The Mundell-Fleming model is essentially an IS-LM model extended to an open economy. The model assume Opening in product market Opening in financial market Ignoring the opening in factor market It is important to note that the model will be different under different exchange rate system. Mundell-Fleming Model Import and export Determination of import Real exchange rate (e) Domestic output (Y) Determination of export Real exchange rate (e) Foreign output (Yf) Mundell-Fleming Model Import and export (continued) Net export X (1) where Mundell-Fleming Model Interest rate parity Due to the opening in financial market, the domestic interest rate should be somehow connected to the international interest rate. Mundell-Fleming Model Interest rate parity (continued) Under the fixed exchange rate system, such connection appears to be i = if (2) where i is the domestic interest rate and if the international interest rate. Wh