ch9A Real Intertemporal Model(中级宏观经济学,香港中文大学).pptVIP

Chapter 9 A Real Intertemporal Model with Investment Introduction Objective: To build a real intertemporal model to serve as a basis for analyzing how macroeconomic shocks affect the economy. Three agents in this economy: the representative consumer the representative firm the government Government behavior is identical to what it is in Chapter 8. The Representative Consumer works and consumes in both current and future period. supplies labor in the labor markets and purchase consumption goods in the goods market. has h units of time in each period. takes w, w’, r and T as given. Current budget constraint: where S p denotes savings in the current period. Future budget constraint In the second period, the consumer receives the principal and interest on S p. Lifetime budget constraint Here the consumer’s lifetime wealth depends on his/her choice on l and l’. Representative Consumer’s Problem Max U( C, C’, l, l’ ) C, C’, l, l’ subject to Marginal conditions that must be satisfied: From the work-leisure decision in the current period, MRS l,C = w. From the work-leisure decision in the future period, MRS l’, C’ = w’. From the consumption-saving decision, MRS C,C’ = 1 + r. Current Labor Supply Current labor supply curve is a relationship between current labor supply (N) and current real wage (w). Recall from Ch.4 that a change in w has opposing substitution and income effects on the optimal l. We assume that substitution effect dominates. Implication: w ? ? l ? , N ?. Thus, the current labor supply curve slopes upward. Factors that shift the current labor supply curve: 1) Real interest rate w (w’) is the price of l ( l’ ) in terms of C (C’); (1 + r) -1 is the price of C’ in terms of C. So w’/ (1 + r) is the price of l’ in terms of C. Hence, r ? ? ? the price of l’ relative to l (substitution effect) Assume substitution effect dominates, then r ? ? current labo