国经CH14.ppt

Exchange Rate Forecasts Using the Simple Model Assumptions Both countries Constant money growth rate m, fixed level of output Y Foreign Money growth m is zero, inflation p is zero Home Money growth m is positive, inflation p is positive Consider two cases: Case 1: Home implements a one-time x% increase in M. Case 2: Home increases its rate of money growth m by Dm What happens to these variables according to the monetary approach? Monetary Regimes and Exchange Rate Regimes Policy makers are concerned with costs of inflation Inflation is unpopular and may have macroeconomic costs These costs a