《宏观经济学教学课件》Chapter_08.pptVIP

Introduction Focus of this chapter is monetary policy Examine how the central bank sets interest rates in order to control aggregate demand Begin with a “media level” description of the operation of central bank policy (who, what, why, when, and how) Fundamentally, the central bank moves interest rates in response to deviations of output and inflation from desired levels ? a notion that is summarized by the Taylor rule Finally, discuss how the central bank decides how much to move interest rates The “Who” of Policy Although both fiscal and monetary policy can be used to fine tune the economy, as a practical matter, most short-run fine tuning is done with monetary policy The “who” of stabilization policy = central bank In the U.S., the central bank is the Federal Reserve Bank Formally, U.S. monetary policy is established by vote of the Fed’s Open Market Committee (FOMC) The chair (currently Ben Bernanke) can typically swing that vote In other countries, the formal decision making authority is vested solely in the governor of the central bank The “What” of Policy What the Fed actually does is set a key interest rate in the economy – the federal funds rate Raising interest rates tends to cool off the economy Lowering interest rates tends to heat up the economy Lower interest rates encourage greater investment spending and greater spending on some consumption goods, thus increasing AD Monetary policy works through AD Monetary policy has little influence on AS The “Why” of Policy Central banks choose short-run policy with two goals in mind: Maintain high economic activity Maintain low inflation rates ? An obvious conflict between these goals Additional conflict between central bank’s preferences and capabilities Except at high inflation rates, boosting economic activity does much more to enhance economic welfare than does controlling inflation ? Due to the different slopes of the SRAS and LRAS Central banks focus on stabilizing economic activity around a sustainable g