国际金融学exchange rate economics课件参考.ppt

Chinese Finance Research Institute Figure 2-2-16 i1 Ms1/P1 Ms2/P1 i2 1 2 St1 St2 1? 3? 2? Expectation changes Short run Long run Ms2/P1 Ms2/P2 2 4 i2 i1 2? 4? St3=?S ? V3. Adjustment Processes: Exchange Rate Dynamics In the long run, the price is flexible. So in react to a permanent increase in money supply, home price goes up slowly, from P1 to P2. Because in the long-run, an increase in the price level must be proportional to an increase in the money supply, the final real money supply keeps unchanged. Thus Ms2/P2=Ms1/P1 holds in the long run. Since in the long run, output is determined by the aggregate supply in the economy, or it is constant, and the real money supply has returned to its initial level, the interest rate must increase and equal its initial level. See Figure 2-2-16 and 2-2-17. Sticky-price Monetary Approach V.4 Exchange Rate Overshooting Overshooting: A permanent increase in home country’s money supply leads to a larger depreciation of home currency than its long-term level and during the long-term adjustment process, the exchange rate converges to its long-term level. Overshooting (and undershooting) helps explain why exchange rates move so sharply from day to day or even within a day. See Figure 2-2-16 and 2-2-17. For more discussions on overshooting model, see Dornbusch (1976), Handa (2000) and Gandolfo (2002). Sticky-price Monetary Approach Figure 2-2-17-1 Overshooting Ms P t t P2 P1 t0 t0 Ms2 Ms1 Figure 2-2-17-2 Overshooting i t t i1 t0 t0 i2 St St1 St2 St3=?S Figure 2-2-17-3 Undershooting Ms P t t P2 P1 t0 t0 Ms2 Ms1 Figure 2-2-17-4 Undershooting i t t i1 t0 t0 i2 St St2 St1 St3=?S VI. Tests Comments A synthesis of monetary approach and Keynesian approach, also a baseline model of open economy macroeconomics. Combined with M-F model, it is also called M-F-D paradigm, a workhorse in open economy macroeconomics; Pioneering another branch of the economics of exchange rate, namely, the exchange rate dynamics; Policy impl