第14讲Output and Exchange Rate in the Short Run(国际金融(香港大学,WONG Ka Fu).ppt

Output and Exchange Rate in the Short Run WONG Ka Fu 28th February 2000 Aggregate demand for domestic goods D=C + I + G + CA = C + I + G + EX - IM Consumption of domestic goods C = C (Yd), dC/dYd 0 = C (Y-T) Yd = disposable income Consumption by home citizens Current account CA = CA (qH/F,Yd) = EX (qH/F,Yd) - IM (qH/F,Yd) qH/F = (EH/F ? PF) / PH The units of home good basket per foreign good basket. For completeness, we can also write CA = CA (qH/F,Yd ,YFd), YFd =Foreign disposable income ?CA/?qH/F 0 (CA measured in domestic output) ?CA/?Yd 0 Aggregate Demand for domestic goods D=C + I + G + CA =C(Y-T) + I + G + CA(qH/F,Y-T) = D(qH/F,Y-T,I,G) 1 ?D/?Y 0 1 ?D/?Y 0 Determination of output in the short run Effect of an increase in E on short-run output equilibrium The following changes have similar effect on DD schedule An increase in G A decrease in T An increase in I A decrease in PH An increase in PF An autonomous increase in consumption A shift of demand from foreign to domestic goods Factors that shift the AA schedule A change in real money supply A change in Ms A change in P A change in Ee A change in RF A change in L(RH,Y) Temporary changes in monetary and fiscal policy Temporary policy shifts are shifts that the public expects to be reversed in the near future. A temporary policy shift does not affect the long-run expected exchange rate, EH/Fe. Two ways to restore full employment A temporary fiscal policy A temporary monetary policy Different effects in the use of fiscal and monetary tools to restore full employment Fiscal temporary increase in G: purchase domestic goods budget deficit Exchange rate returns to pre-shock level Monetary temporary increase in money supply interest rate decreases Exchange rate (E) higher than pre-shock level Exchange rate also higher than the case without any stabilizing policy. Two ways to restore full employment A temporary fiscal policy A temporary monetary policy Permanent shifts in monetary and fisca