lecture 5 DD-AA model 国际金融课件.ppt

Chinese Finance Research Institute S Y Yf Se AA2 DD Figure 3-1-12-1 Short-run effects of a permanent monetary policy AA1 S1 Y1 1 2 3 expectations S Y Yf Se AA2 DD Figure 3-1-12-2 Long-run adjustments AA1 S1 Y1 1 2 3 DD1 AA3 ?S Permanent Changes in Policies II. Permanent Changes in Fiscal Policy Conclusion: If the economy starts at long-run equilibrium, a permanent change in fiscal policy has no net effect on output. Instead, it causes an immediate and permanent exchange rate jump that affects exactly the fiscal policy’s direct effect on aggregate demand (Krugman et al, 2012, 446). See Figure 3-1-13. See also Krugman et al (2012) for a detailed explanation for the conclusion on 446. S Y Yf AA DD1 Figure 3-1-13 Effects of a permanent fiscal policy DD2 1 3 2 S2 S1 * * Contents The DD Schedule The AA Schedule Temporary Changes in Policies Permanent Changes in Policies Macroeconomic Policy the Current Account Assignments In the previous lectures, we have assumed implicitly that output is an exogenous variable. However, “events that change exchange rates, interest rates, and price levels may also affect output. Now we complete the picture by examining how output and the exchange rate are determined in the short run (Krguman et al, 2012, p421).” “By combining a short-run model of the output market with our models of the foreign exchange and money markets (the asset markets), we build a model that explains the short-run behavior of all the important macroeconomic variables in an open economy. (Krguman et al, 2012, p421)” The DD Schedule I. Aggregate Demands in an Open Economy I.1 Consumption Demand C=C(Yd) Where, Yd stands for disposable income(Yd=Y-T), which equals national income less taxes. I.2 Current Account Determinants CA=CA(SP*/P, Yd) Where, SP*/P denotes real exchange rate. Determinants of current account (Table 3-1-1) The DD Schedule Table 3-1-1 Determinants of the Current Account The DD Schedule “While we have couched our