微观经济学32Macroeco_OpenEconomy

1、chapter 32 a macroeconomic theory of the open economyopen economies an open economy is one that interacts freely with other economies around the world. key macroeconomic variables in an open economy the important macroeconomic variables of an open economy include: net exports net foreign investment

2、nominal exchange rates real exchange rates basic assumptions of a macroeconomic model of an open economy the model takes the economys gdp as given. the model takes the economys price level as given.32.1 supply and demand for loanable funds and for foreign-currency exchange the market for loanable fu

3、ndss = i + nco at the equilibrium interest rate, the amount that people want to save exactly balances the desired quantities of investment and net capital outflows.32.1.1 the market for loanable funds the supply of loanable funds comes from national saving (s). the demand for loanable funds comes fr

4、om domestic investment (i) and net capital outflows (nco).32.1.1 the market for loanable funds the supply and demand for loanable funds depend on the real interest rate. a higher real interest rate encourages people to save and raises the quantity of loanable funds supplied. the interest rate adjust

5、s to bring the supply and demand for loanable funds into balance.figure 1 the market for loanable fundsquantity ofloanable fundsrealinterestratesupply of loanable funds(from national saving)demand for loanablefunds (for domesticinvestment and netcapital outflow)equilibriumquantityequilibriumreal int

6、erestrate32.1.1 the market for loanable funds at the equilibrium interest rate, the amount that people want to save exactly balances the desired quantities of domestic investment and net foreign investment.32.1.2 the market for foreign-currency exchange the two sides of the foreign-currency exchange

7、 market are represented by nco and nx.nco = nxnet capital outflow = net exports. nco represents the imbalance between the purchases and sales of capital assets. nx represents the imbalance between exports and imports of goods and services.32.1.2 the market for foreign-currency exchange in the market

8、 for foreign-currency exchange, u.s. dollars are traded for foreign currencies. for an economy as a whole, nco and nx must balance each other out, or:nco = nx32.1.2 the market for foreign-currency exchange net capital outflow represents the quantity of dollars supplied for the purpose of buying fore

9、ign assets. for example, when a u.s. mutual fund wants to buy a japanese government bond, it needs to change dollars into yen, so it supplies dollars in the market for foreign-currency exchange.32.1.2 the market for foreign-currency exchange net exports represents the quantity of dollars demanded fo

10、r the purpose of buying u.s. net exports of goods and services. for example, when a japanese airline wants to buy a plane made by boeing, it needs to change its yen into dollars, so it demands dollars in the market for foreign-currency exchange. the price that balances the supply and demand for fore

11、ign-currency is the real exchange rate.32.1.2 the market for foreign-currency exchange the demand curve for foreign currency is downward sloping because a higher exchange rate makes domestic goods more expensive. the supply curve is vertical because the quantity of dollars supplied for net capital o

12、utflow is unrelated to the real exchange rate.figure 2 the market for foreign-currency exchangequantity of dollars exchangedinto foreign currencyrealexchangeratesupply of dollars(from net capital outflow)demand for dollars(for net exports)equilibriumquantityequilibriumreal exchangerate32.1.2 the mar

13、ket for foreign-currency exchange the real exchange rate adjusts to balance the supply and demand for dollars. at the equilibrium real exchange rate, the demand for dollars to buy net exports exactly balances the supply of dollars to be exchanged into foreign currency to buy assets abroad.32.2 equil

14、ibrium in the open economy32.2.1 net capital outflow: the link between the two markets in the market for loanable funds, supply comes from national saving and demand comes from domestic investment and net capital outflow. in the market for foreign-currency exchange, supply comes from net capital out

15、flow and demand comes from net exports.32.2.1 net capital outflow: the link between the two marketsnet capital outflow links the loanable funds market and the foreign-currency exchange market.1) in the market for loanable funds, net capital outflow is a piece of demand. a person who wants to buy an

16、asset abroad must finance this purchase by obtaining resources in the market for loanable funds.32.2.1 net capital outflow: the link between the two markets2) in the market for foreign-currency exchange, net capital outflow is the source of supply. a person who wants to buy an asset in another count

17、ry must supply dollars in order to exchange for them for the currency of that country.the key determinant of net capital outflow is the real interest rate. when the u.s. interest rate is high, owning u.s.assets is more attractive, and u.s. net capital outflow is low.figure 3 how net capital outflow

18、depends on the interest rate0net capitaloutflownet capital outflowis negative.net capital outflowis positive.realinterestrate32.2.2 simultaneous equilibrium in two markets prices in the loanable funds market and the foreign-currency exchange market adjust simultaneously to balance supply and demand

19、in these two markets. as they do, they determine the macroeconomic variables of national saving, domestic investment, net foreign investment, and net exports.32.2.2 simultaneous equilibrium in two markets panel (a) of the figure shows the market for loanable funds. as before, national saving is the

20、source of the supply of loanable funds. domestic investment and net capital outflow are the source of the demand for loanable funds. the equilibrium real interest rate(r1) brings the quantity of loanable funds supplied and the quantity of loanable funds demanded into balance. panel (b) of the figure

21、 shows net capital outflow.it shows how the interest rate from panel (a) determines net capital outflow. a higher interest rate at home makes domestic assets more attractive, and this in turn reduces net capital outflow. therefore, the net capital outflow curve in panel (b) slopes downward.32.2.2 si

22、multaneous equilibrium in two markets panel (c) of the figure shows the market for foreign-currency exchange. because foreign assets must be purchased with foreign currency, the quantity of net capital outflow from panel (b) determines the supply of dollars to be exchanged into foreign currencies. t

23、he real exchange rate does not affect net capital outflow, so the supply curve is vertical. the demand for dollars come from net exports. because a depreciation of the real exchange rate increases net exports, the demand curve for foreign-currency exchange slopes downward.figure 4 the real equilibri

24、um in an open economy(a) the market for loanable funds(b) net capital outflownet capitaloutflow, ncorealinterestraterealinterestrate(c) the market for foreign-currency exchangequantity ofdollarsquantity ofloanable fundsnet capitaloutflowrealexchangeratesupplysupplydemanddemandrre32.3 how policies an

25、d events affect an open economy32.3 how policies and events affect an open economy the magnitude and variation in important macroeconomic variables depend on the following: government budget deficits trade policies political and economic stability32.3.1 government budget deficits in an open economy,

26、 government budget deficits . . . reduce the supply of loanable funds, drive up the interest rate, crowd out domestic investment, cause net foreign investment (nco) to fall, cause the currency to appreciate, push the trade balance toward deficit.figure 5 the effects of government budget deficit(a) t

27、he market for loanable funds(b) net capital outflowrealinterestraterealinterestrate(c) the market for foreign-currency exchangequantity ofdollarsquantity ofloanable fundsnet capitaloutflowrealexchangeratedemanddemandr2ncossssr2be1rra1. a budget deficit reducesthe supply of loanable funds . . . 2. .

28、. . which increasesthe real interestrate . . . 4. the decreasein net capitaloutflow reducesthe supply of dollarsto be exchangedinto foreigncurrency . . . 5. . . . which causes thereal exchange rate toappreciate.3. . . . which inturn reducesnet capitaloutflow.e232.3.1 government budget deficits effec

29、t of budget deficits on the loanable funds market a government budget deficit reduces national saving, which . . . shifts the supply curve for loanable funds to the left, which . . . raises interest rates.32.3.1 government budget deficits effect of budget deficits on net foreign outflow: panel (b) s

30、hows that the increase in the interest rate from r1 to r2 reduces net capital outflow. because saving kept at home now earns higher rates of return, investing abroad is less attractive, and domestic residents buy fewer foreign assets. higher interest rates also attract foreign investors, who want to

31、 earn the higher returns on us. assets. thus, when budget deficits raise interest rates, both domestic and foreign behavior cause us. net capital outflow to fall.32.3.1 government budget deficits effect on the foreign-currency exchange market a decrease in net foreign investment reduces the supply o

32、f dollars to be exchanged into foreign currency. this causes the real exchange rate to appreciate.32.3.2 trade policy a trade policy is a government policy that directly influences the quantity of goods and services that a country imports or exports. tariff: a tax on an imported good. import quota:

33、a limit on the quantity of a good produced abroad and sold domestically.32.3.2 trade policy because they do not change national saving or domestic investment, trade policies do not affect the trade balance. for a given level of national saving and domestic investment, the real exchange rate adjusts

34、to keep the trade balance the same. trade policies have a greater effect on microeconomic than on macroeconomic markets.32.3.2 trade policy effect of an import quota because foreigners need dollars to buy u.s. net exports, there is an increased demand for dollars in the market for foreign-currency.

35、this leads to an appreciation of the real exchange rate.32.3.2 trade policy effect of an import quota an appreciation of the dollar in the foreign exchange market encourages imports and discourages exports. this offsets the initial increase in net exports due to import quota.figure 6 the effects of

36、an import quota(a) the market for loanable funds(b) net capital outflowrealinterestraterealinterestrate(c) the market for foreign-currency exchangequantity ofdollarsquantity ofloanable fundsnet capitaloutflowrealexchangeraterrsupplysupplydemandncodd3. net exports,however, remainthe same.2. . . . and

37、 causes thereal exchange rate to appreciate.ee21. an importquota increasesthe demand fordollars . . . 32.3.2 trade policy effect of an import quota there is no change in the interest rate because nothing happens in the loanable funds market. there will be no change in net exports. there is no change

38、 in net foreign investment even though an import quota reduces imports.32.3.2 trade policy effect of an import quota: trade policies do not affect the trade balance. that is, policies that directly influence exports or imports do not alter net exports. this conclusion seems less surprising if one re

39、calls the accounting identity:nx = nco = s i32.3.2 trade policy nx = nco = s i net exports equal net capital outflow, which equals national saving minus domestic investment. trade policies do not alter the trade balance because they do not alter national saving or domestic investment. for given leve

40、ls of national saving and domestic investment, the real exchange rate adjusts to keep the trade balance the same, regardless of the trade policies the government puts in place. although trade policies do not affect a countrys overall trade balance, these policies do affect specific firms , industrie

41、s, and countries.32.3.3 political instability and capital flight in 1994 political instability in mexico, including the assassination of a prominent political leader, made would financial markets nervous. people began to view mexico as a much less stable country than they had previously thought. the

42、y decided to pull some of their assets out of mexico in order to move these funds to the u.s. and other “safe heaven”. such a large and sudden movement of funds out of a country is called capital flight.32.3.3 political instability and capital flight capital flight 资本外逃 is a large and sudden reducti

43、on in the demand for assets located in a country.32.3.3 political instability and capital flight capital flight has its largest impact on the country from which the capital is fleeing, but it also affects other countries. if investors become concerned about the safety of their investments, capital c

44、an quickly leave an economy. interest rates increase and the domestic currency depreciates.32.3.3 political instability and capital flight this increased mexican net capital outflow. the demand for loanable funds in the loanable funds market increased, which increased the interest rate. this increas

45、ed the supply of pesos in the foreign-currency exchange market. decreases the value of the mexican peso in the market for foreign-currency exchange.32.3.3 political instability and capital flight to see the effects of capital flight on the economy,we compare the old and new equilibria. panel (a) of

46、figure 7 shows that the increased demand for loanable funds causes the interest rate in mexico to rise from r1 to r2. panel (b) shows that mexican net capital outflow increases. (although the rise in the interest rate does make mexican assets more attractive, this only partly offsets the impact of c

47、apital flight on net capital outflow.) 32.3.3 political instability and capital flight panel (c ) shows that the increase in net capital outflow raises the supply of pesos in the market for foreign-currency exchange from s1 to s2. that is, as people try to get out of mexican assets, there is a large

48、 supply of pesos to be converted into dollars.this increase in supply causes the peso to depreciate from e1 to e2. thus, capital flight from mexico increases mexican interest rates and decreases the value of the mexican peso in the market for foreign-currency exchange.32.3.3 political instability an

49、d capital flight this is exactly what was observed in 1994. from november 1994 to march 1995, the interest rate on short-term mexican government bonds rose from 14 percent to 70 percent, and the peso depreciated in value from 29 to 15 u.s. cents per peso. figure 7 the effects of capital flight(a) th

50、e market for loanable funds in mexico(b) mexican net capital outflowrealinterestraterealinterestrate(c) the market for foreign-currency exchangequantity ofpesosquantity ofloanable fundsnet capitaloutflowrealexchangerater1r1d1d2edemandss2supplynco2nco11. an increase in net capitaloutflow. . . 3. . .

51、. which increasesthe interestrate.2. . . . increases the demandfor loanable funds . . . 4. at the sametime, the increasein net capitaloutflowincreases thesupply of pesos . . . 5. . . . which causes thepeso todepreciate.r2r2esummary to analyze the macroeconomics of open economies, two markets are cen

52、tralthe market for loanable funds and the market for foreign-currency exchange. in the market for loanable funds, the interest rate adjusts to balance supply for loanable funds (from national saving) and demand for loanable funds (from domestic investment and net capital outflow).summary in the market for foreign-currency exchange, the real exchange rate adjusts to balance the supply of doll