国际经济15.ppt

Chapter 15 Price Levels and the Exchange Rate in the Long Run Chapter Organization Introduction The Law of One Price Purchasing Power Parity A Long-Run Exchange Rate Model Based on PPP Empirical Evidence on PPP and the Law of One Price Explaining the Problems with PPP Chapter Organization Beyond Purchasing Power Parity: A General Model of Long-Run Exchange Rates International Interest Rate Differences and the Real Exchange Rate Real Interest Parity Summary Appendix: The Fisher Effect, the Interest Rate, and the Exchange Rate Under the Flexible-Price Monetary Approach Introduction The model of long-run exchange rate behavior provides the framework that actors in asset markets use to forecast future exchange rates. Predictions about long-run movements in exchange rates are important even in the short run. In the long run, national price levels play a key role in determining both interest rates and the relative prices at which countries’ products are traded. The theory of purchasing power parity (PPP) explains movements in the exchange rate between two countries’ currencies by changes in the countries’ price levels. The Law of One Price Law of one price Identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency. This law applies only in competitive markets free of transport costs and official barriers to trade. Example: If the dollar/pound exchange rate is $1.50 per pound, a sweater that sells for $45 in New York must sell for ￡30 in London. The Law of One Price It implies that the dollar price of good i is the same wherever it is sold: PiUS = (E$/€) x (PiE) where: PiUS is the dollar price of good i when sold in the U.S. PiE is the corresponding euro price in Europe E$/€ is the dollar/euro exchange rate Purchasing Power Parity Theory of Purchasing Power Parity (PPP) The exchange rate between two counties’ currencies equals the ratio of the counties’