清华大学宏观经济学Chapter-15.pptVIP

* This slide presents the experiment described on pp.449-451 of the text. * The lower graph illustrates an important concept in macroeconomics: a central bank can permanently lower inflation by inducing a recession. * The sluggish behavior of inflation results from our assumption that expectations are adaptive. * * * This and the following two slides correspond to the first half of Section 15-4, pp.453-455. * Most students can readily see that the slope of the DAD curve determines the relative magnitudes of the effects on output vs. inflation. What is less obvious is the relation between the theta parameters and DAD’s slope. You can convince students of the relationship using intuition and using math: Intuition: Large θπ and small θY means the central bank is more concerned with keeping inflation close to its target than with keeping output (and hence employment) close to their natural rates. Thus, a small change in inflation will induce the central bank to more sharply raise the real interest rate, causing a significant drop in the quantity of goods demanded. Math: Look at the equation for the DAD curve, either on p.441 or on an earlier slide. Output appears on the left-hand side, while inflation is on the right. The coefficient on inflation is a ratio that contains θπ in the numerator and θY in the denominator. Other things equal, an increase in θπ or a decrease in θY will increase this coefficient. Of course, the coefficient is NOT the slope of the DAD curve (because output, not inflation, is on the left-hand side); it is the inverse of the slope of the DAD. Hence, if this coefficient is large, the slope of DAD is small, and the DAD curve is relatively flat, as depicted here. * In this case, the DAD curve is steep. Intuition: Small θπ and large θY mean the central bank is more concerned with maintaining full employment output than with keeping inflation close to its target. Thus, even if inflation rises a lot, the centra