曼昆14.ppt

Learning objectives In this chapter, you will learn about two policy debates: Should policy be active or passive? Should policy be by rule or discretion? Question 1: Should policy be active or passive? U.S. Real GDP Growth Rate, 1960:1-2001:4 Arguments for active policy Recessions cause economic hardship for millions of people. The Employment Act of 1946: “it is the continuing policy and responsibility of the Federal Government to…promote full employment and production.” The model of aggregate demand and supply (Chapters 9-13) shows how fiscal and monetary policy can respond to shocks and stabilize the economy. Change in unemployment during recessions Arguments against active policy Long variable lags inside lag: the time between the shock and the policy response takes time to recognize shock takes time to implement policy, especially fiscal policy outside lag: the time it takes for policy to affect economy Automatic stabilizers definition: policies that stimulate or depress the economy when necessary without any deliberate policy change. They are designed to reduce the lags associated with stabilization policy. Examples: income tax unemployment insurance welfare Forecasting the macroeconomy Because policies act with lags, policymakers must predict future conditions. Ways to generate forecasts: Leading economic indicators: data series that fluctuate in advance of the economy Macroeconometric models:Large-scale models with estimated parameters that can be used to forecast the response of endogenous variables to shocks and policies The LEI index and Real GDP, 1960s The LEI index and Real GDP, 1970s The LEI index and Real GDP, 1980s The LEI index and Real GDP, 1990s Mistakes Forecasting the Recession of 1982 Forecasting the macroeconomy Because policies act with lags, policymakers must predict future conditions. The Lucas Critique Due to Robert Lucaswon Nobel Prize in 1995 for “rational expectations” Forecasting the effects of policy changes has often bee