CHAP重放放开经济蒙代尔——费莱明模型和汇率制度中文版.pptVIP

* * * The monetary expansion puts downward pressure on the exchange rate. To prevent it from falling, the central bank starts buying domestic currency in greater quantities to “prop up” the value of the currency in foreign exchange markets. This buying removes domestic currency from circulation, causing the money supply to fall, which shifts the LM* curve back. Another way of looking at it: To keep the exchange rate fixed, the central bank must use monetary policy to shift LM* as required so that the intersection of LM* and IS* always occurs at the desired exchange rate. Unless the IS* curve shifts right (an experiment we are not considering now), the central bank simply cannot increase the money supply. * Suggestion: Assign this experiment as an in-class exercise. Give students 3 minutes to work on it before displaying the answer on the screen. * Table 12-1 on p.351. (“M-F” = “Mundell-Fleming”) This table makes it easy to see that the effects of policies depend very much on whether exchange rates are fixed or flexible. * * The first equation says that a country’s interest rate equals the world interest rate plus a risk premium (whose size depends on investors’ perceptions of the political economic risk of holding that country’s assets and on the expected rate of depreciation or appreciation of the country’s currency. We can now use the M-F model to analyze the effects of a change in the risk premium. The next few slides present this analysis, then discuss an important real-world example (the Mexican peso crisis). * Intuition: If prospective lenders expect the country’s currency to depreciation, or if they perceive that the country’s assets are especially risky, then they will demand that borrowers in that country pay them a higher interest rate (over and above r*). The higher interest rate reduces investment and shifts the IS* curve to the left. But it also lowers money demand, so income must rise to restore money market equilibrium.