宏观经济学ch05国内外财政政策图标教程.pptVIP

* * * Here we again see the Classical Dichotomy in action. The real exchange rate is determined by real factors, and nominal variables only affect nominal variables. * Figure 5-13 on p.137. The horizontal axis measures the country’s inflation rate minus the U.S. inflation rate. The vertical axis measures the percentage change in the U.S. dollar exchange rate with that country. This figure shows a very clear relationship between the inflation differential and the rate of dollar appreciation. * * PPP implies that the cost of a basket of goods (even a basket with just one good, like a Big Mac or a latte) should be the same across countries. e P = the foreign-currency cost of a basket of goods in the U.S., while P* the cost of a basket of foreign goods. PPP implies that the baskets cost the same in both countries: eP = P*, which implies that e = P*/P. * Revisiting our model, this implies that the NX curve should be horizontal at ? = 1. Intuition for the horizontal NX curve: Under PPP, different countries’ goods are perfect substitutes, and international arbitrage is possible. If the relative price of U.S. goods falls even a tiny bit below 1, then there’s a profit opportunity: buy U.S. goods and sell them abroad. Hence, the tiniest drop in the U.S. real exchange rate causes a massive increase in NX. Similarly, if the relative price of U.S. goods rises even a tiny amount above 1, then it is profitable to buy foreign goods and sell them in the U.S., so this arbitrage causes a massive increase increase in imports---and decrease in NX. Thus, under PPP, the real exchange rate equals 1 regardless of net capital outflows S-I. Changes in S or I have no impact on the real exchange rate. * * * This is a continuation of the case study begun in Chapter 3 (both the textbook and slides 49-51 of the PowerPoint presentation). It is placed here to motivate the last topic of the text: the U.S. as a large open economy. As we saw in chapter 3, the