巴罗宏观经济学：现代观点第10章.ppt

1、Macroeconomics Chapter 10,1,The Demand for Money and the Price Level,C h a p t e r 1 0,Macroeconomics Chapter 10,2,Macroeconomics Chapter 10,3,Concepts of Money,Fiat money has value due to government fiat, rather than through intrinsic value. Commodity money, such as gold and silver coins, which do

2、have intrinsic value. High-powered money, which adds the deposits held by banks and other depository institutions At the Federal Reserve. Another name for high-powered money is the monetary base,Macroeconomics Chapter 10,4,Concepts of Money,Monetary aggregate A monetary aggregate is the total dollar

3、 stock of a group of financial assets defined to be money. The most common definition, called M1 Checkable deposits issued by banks and other financial institutions,Macroeconomics Chapter 10,5,Macroeconomics Chapter 10,6,Macroeconomics Chapter 10,7,Concepts of Money,Monetary aggregate M2 includes ho

4、usehold holdings of savings deposits, small-time deposits, and retail money-market mutual funds. The M2 definition goes beyond the concept of money as a medium of exchange. In our model, it is best to use a narrower definition of money, for example, as currency held by the public,Macroeconomics Chap

5、ter 10,8,The Demand for Money,Money is hand-to-hand currency Assume that the interest rate paid on money is zero. Bonds and ownership of capital Interest-bearing assets These assets pay a positive return to the holder,Macroeconomics Chapter 10,9,The Demand for Money,The household budget constraint i

6、n nominal terms PC + B + PK = + wL + i ( B+ PK) nominal consumption + nominal saving = nominal income,Macroeconomics Chapter 10,10,The Demand for Money,demand for money,” Md, The average holding of money that results from the households optimal strategy for money management,Macroeconomics Chapter 10

7、,11,The Demand for Money,The Interest Rate and the Demand for Money A higher interest rate, i, provides a greater incentive to hold down average holdings of money, M, in order to raise average holdings of interest-bearing assets, B + PK. That is, with a higher i, households are more willing to incur

8、 transaction costs in order to reduce M,Macroeconomics Chapter 10,12,The Demand for Money,The Interest Rate and the Demand for Money We predict, accordingly, that an increase in i reduces the nominal demand for money, Md. For a given price level, P, we can also say that a higher i lowers the real de

9、mand for money, Md/P,Macroeconomics Chapter 10,13,The Demand for Money,The Price Level and the Demand for Money Suppose that the price level, P, doubles. The nominal demand for money, Md, doubles. Since Md and P have both doubled, the ratio, Md/P, is the same. The result is that the real demand for

10、money, Md/P, does not change when P changes,Macroeconomics Chapter 10,14,The Demand for Money,Real GDP and the Demand for Money Assume now that nominal income doubles, while the price level, P, is unchanged. Households would double their nominal demand for money, Md. Since P is constant, the real de

11、mand for money, Md/P, also doubles,Macroeconomics Chapter 10,15,The Demand for Money,Real GDP and the Demand for Money Economies of scale in cash management, at higher incomes households hold less money in proportion to their income,Macroeconomics Chapter 10,16,The Demand for Money,Other Influences

12、on the Demand for Money Payments technology The level of transaction costs,Macroeconomics Chapter 10,17,The Demand for Money,The Money-Demand Function Md = P L(Y, i) Md/P = L( Y, i,Macroeconomics Chapter 10,18,The Demand for Money,Empirical Evidence on the Demand for Money Steven Goldfeld Casey Mull

13、igan and Xavier Sala-i-Martin Michael Dotsey,Macroeconomics Chapter 10,19,Determination of the Price Level,The Nominal Quantity of Money Supplied Equals the Nominal Quantity Demanded Ms = Md Md = P L( Y, i) Key equation: Ms = P L( Y, i,Macroeconomics Chapter 10,20,Determination of the Price Level,Ge

14、neral equilibrium. Ms = Md Ls = Ld (K)s = (K)d,Macroeconomics Chapter 10,21,Determination of the Price Level,Macroeconomics Chapter 10,22,Determination of the Price Level,A Change in the Nominal Quantity of Money From a one-time change in the nominal quantity of money supplied,Ms. The increase in Ms

15、 from M to 2M raises the equilibrium price level from P to 2P,Macroeconomics Chapter 10,23,Determination of the Price Level,Macroeconomics Chapter 10,24,Determination of the Price Level,A Change in the Nominal Quantity of Money Since the technology level, A, has not changed, the real wage rate, w/P,

16、 and labor input, L, do not change. Therefore, the price level, P, is twice as high, and w/P is unchanged. We conclude that, in general equilibrium, the nominal wage rate, w, has to double,Macroeconomics Chapter 10,25,Determination of the Price Level,A Change in the Nominal Quantity of Money The unc

17、hanged technology level, A, means that the real rental price, R/P, and the quantity of capital services, K, do not change. The fixed K corresponds to a given capital stock, K, and an unchanged capital utilization rate, . Thus, the price level, P, is twice as high, and R/P is unchanged. We must have,

18、 in general equilibrium, that the nominal rental price, R, doubles,Macroeconomics Chapter 10,26,Determination of the Price Level,A Change in the Nominal Quantity of Money i = (R/P) () . The doubling of Ms does not change the real rental price, R/P, and the capital utilization rate, , the rate of ret

19、urn on ownership of capital does not change on the right hand side of equation The interest rate, i, is also unchanged,Macroeconomics Chapter 10,27,Determination of the Price Level,A Change in the Nominal Quantity of Money Y= A F( K, L) A doubling of Ms does not affect the quantities of capital serv

20、ices, K, and labor, L. In other words, in general equilibrium, a one-time increase in the nominal quantity of money supplied, Ms, does not affect real GDP,Macroeconomics Chapter 10,28,Determination of the Price Level,The Neutrality of Money In the long run, an increase or decrease in the nominal qua

21、ntity of money supplied, Ms, influences nominal variables but not real ones,Macroeconomics Chapter 10,29,Determination of the Price Level,A Change in the Demand for Money An improvement in the technology for making financial transactionsperhaps increased use of credit cards or ATM machinesdecreases

22、the real demand for money to L(Y, i), so that the nominal demand becomes: ( Md) = P L( Y, i),Macroeconomics Chapter 10,30,Determination of the Price Level,Macroeconomics Chapter 10,31,Determination of the Price Level,A Change in the Demand for Money A decrease in the real demand for money is similar

23、 to an increase in the nominal quantity Of money supplied in that the price level, P, rises in each case. However, one difference is that a change in Ms is fully neutral, whereas a change in the real demand for money is not fully neutral,Macroeconomics Chapter 10,32,Determination of the Price Level,

24、The Cyclical Behavior of the Price Level A recession, decline in Y reduces the real quantity of money demanded The decrease in i raises the real quantity of money demanded In a recession, the real quantity of money demanded, given by L(Y, i), decreases overall,Macroeconomics Chapter 10,33,Determinat

25、ion of the Price Level,The Cyclical Behavior of the Price Level Given nominal quantity of money supplied, Ms, the decrease in the real quantity of money demanded, L(Y, i), raises the price level, P. That is P will be countercyclical,Macroeconomics Chapter 10,34,Determination of the Price Level,Macro

26、economics Chapter 10,35,Determination of the Price Level,The Cyclical Behavior of the Price Level In our equilibrium business cycle model, the underlying shocks come from the supply side, not the demand side. A low technology level, Athe source of a recession in the modelmeans that goods and service

27、s are in low supply. When looked at this way, it makes sense that P would tend to be high in a recession,Macroeconomics Chapter 10,36,Determination of the Price Level,Price-Level Targeting and Endogenous Money When the monetary authority seeks to attain a specified price level, P, it typically has t

28、o adjust the nominal quantity of money, M, in response to changes in the nominal quantity demanded, Md,Macroeconomics Chapter 10,37,Determination of the Price Level,Price-Level Targeting and Endogenous Money To see how this works, we now assume that the monetary authority wants the price level, P to

29、 equal a target level P0. This objective is called price-level targeting,Macroeconomics Chapter 10,38,Determination of the Price Level,Price-Level Targeting and Endogenous Money M = P0 L( Y, i ) nominal quantity of money = price-level target real quantity of money demanded,Macroeconomics Chapter 10,39,Determination of the Price Level,Price-Level Targeting and Endogenous Money Trend growth of money Since L(Y, i) grows at the same rate as real GDP, Y, we