曼昆第10版课件mankiw10e-lecture-slides-ch14

AggregateSupplyandtheShort-RunTradeoffBetweenInflationandUnemploymentMacroeconomicsN.GregoryMankiw©2019WorthPublishers,allrightsreservedINTHISCHAPTER,YOUWILLLEARN:AbouttwomodelsofaggregatesupplyinwhichoutputdependspositivelyonthepricelevelintheshortrunAbouttheshort-runtradeoffbetweeninflationandunemployment,knownasthePhillipscurveIntroduction,part1Inpreviouschapters,weassumedthatthepricelevelPwas“stuck”intheshortrun.ThisimpliesahorizontalSRAScurve.Now,weconsidertwoprominentmodelsofaggregatesupplyintheshortrun:Sticky-pricemodelImperfect-informationmodelIntroduction,part2Bothmodelsimply:Otherthingsequal,YandParepositivelyrelated,sotheSRAScurveisupwardsloping.Thesticky-pricemodel,part1Reasonsforstickyprices:long-termcontractsbetweenfirmsandcustomersmenucostsfirmsnotwishingtoannoycustomerswithfrequentpricechangesAssumption:Firmssettheirownprices(asinmonopolisticcompetition).Thesticky-pricemodel,part2Anindividualfirm’sdesiredpriceis:wherea

>0.Supposetherearetwotypesoffirms:firmswithflexibleprices—setpricesasabovefirmswithstickyprices—mustsettheirpricesbeforetheyknowhowP

andY

willturnout:Thesticky-pricemodel,part3Assumethatsticky-pricefirmsexpectthatoutputwillequalitsnaturalrate.Then,Toderivetheaggregatesupplycurve,

firstfindanexpressionfortheoverallpricelevel.s

=fractionoffirmswithstickyprices.

Then,wecanwritetheoverallpricelevelas...Thesticky-pricemodel,part4Subtract(1−s)Pfrombothsides:Dividebothsidesbys:Thesticky-pricemodel,part5HighEPg

highP

Iffirmsexpecthighprices,thenfirmsthatmustsetpricesinadvancewillsetthemhigh.

Otherfirmsrespondbysettingpriceshigh.HighY

g

highP

Whenincomeishigh,thedemandforgoodsishigh.Firmswithflexiblepricessetpriceshigh.Thegreaterthefractionofflexible-pricefirms,thesmallerissandthebiggertheeffectofΔY

onP.Thesticky-pricemodel,part6Finally,derivetheASequationbysolvingforY:Theimperfect-informationmodel,part1Assumptions:Allwagesandpricesareperfectlyflexible,and

allmarketsareclear.Eachsupplierproducesonegoodandconsumesmanygoods.Eachsupplierknowsthenominalpriceofthegoodsheproducesbutdoesnotknowtheoverallpricelevel.Theimperfect-informationmodel,part2Thesupplyofeachgooddependsonitsrelativeprice:thenominalpriceofthegooddividedbytheoverallpricelevel.Thesupplierdoesn’tknowpricelevelatthetimeshemakesherproductiondecisionsousesEP.SupposePrisesbutEPdoesnot.Supplierthinksherrelativepricehasrisen,sosheproducesmore.Withmanyproducersthinkingthisway,YwillrisewheneverPrisesaboveEP.Summaryandimplications,part1Summaryandimplications,part2SRASequation:Inflation,unemployment,andthePhillipscurveThePhillipscurve

statesthatπ

dependson:expectedinflation,Eπcyclicalunemployment:thedeviationoftheactualrateofunemployment(u)fromthenaturalrate(un)supplyshocks,ν(Greekletternu).whereβ

>0isanexogenousconstant.DerivingthePhillipscurvefromSRASComparingSRASandthePhillipscurvesSRAScurve:

Outputisrelatedtounexpectedmovementsinthepricelevel.Phillipscurve:

Unemploymentisrelatedtounexpectedmovementsintheinflationrate.AdaptiveexpectationsAdaptiveexpectations:anapproachthatassumespeopleformtheirexpectationsoffutureinflationbasedonrecentlyobservedinflation.Asimpleversion:

expectedinflation=lastyear’sactualinflationThen,PhillipscurveequationbecomesInflationinertiaInthisform,thePhillipscurveimpliesthatinflationhasinertia:Intheabsenceofsupplyshocksorcyclicalunemployment,inflationwillcontinueindefinitelyatitscurrentrate.Pastinflationinfluencesexpectationsofcurrentinflation,whichinturninfluencesthewagesandpricesthatpeopleset.Twocausesofrisingandfallinginflationcost-pushinflation:

inflationresultingfromsupplyshocksAdversesupplyshockstypicallyraiseproductioncostsandinducefirmstoraiseprices,pushinginflationup.demand-pullinflation:

inflationresultingfromdemandshocksPositiveshockstoaggregatedemandcauseunemploymenttofallbelowitsnaturalrate,whichpullstheinflationrateup.ShiftingthePhillipscurvePeopleadjusttheirexpectationsovertime,sothetradeoffonlyholdsintheshortrun.Example:anincreaseinEπ

shiftstheshort-runPhillipscurveupward.Thesacrificeratio,part1Toreduceinflation,policymakerscancontractaggregatedemand,causingunemploymenttoriseabovethenaturalrate.Thesacrificeratiomeasuresthepercentageofayear’srealGDPthatmustbeforgonetoreduceinflationby1percentagepoint.Atypicalestimateoftheratiois5.Thesacrificeratio,part2Example:Toreduceinflationfrom6%to2%,mustsacrifice20%ofoneyear’sGDP:GDPloss=(inflationreduction)×(sacrificeratio)=4×5Thislosscouldbeincurredin1yearorspreadoverseveral(example:5%lossforeachof4years).ThecostofdisinflationislostGDP.

OnecoulduseOkun’slawtotranslatethiscostintounemployment.RationalexpectationsWaysofmodelingtheformationofexpectations:adaptiveexpectations:

Peoplebasetheirexpectationsoffutureinflationonrecentlyobservedinflation.rationalexpectations:

Peoplebasetheirexpectationsonallavailableinformation,includinginformationaboutcurrentandprospectivefuturepolicies.Painlessdisinflation?Proponentsofrationalexpectationsbelievethatthesacrificeratiomaybeverysmall:Supposeu=unandπ

=Eπ

=6%,andsupposetheFedannouncesthatitwilldowhateverisnecessarytoreduceinflationfrom6%to2%assoonaspossible.Iftheannouncementiscredible,thenEπwillfall,perhapsbythefull4points.Then,π

canfallwithoutanincreaseinu.CalculatingthesacrificeratiofortheVolckerdisinflation,part1YearUnemploymentRateuNaturalRateunCyclicalUnemploymentu−un19829.7%6.0%3.7%19839.66.03.619847.56.01.519857.26.01.2Total10.0%CalculatingthesacrificeratiofortheVolckerdisinflation,part2Frompreviousslide:Inflationfellby6.7%,andtotalcyclicalunemploymentwas9.5%.Okun’slaw:

1%ofunemployment=2%oflostoutputThus,9.5%cyclicalunemployment

=19.0%ofayear’srealGDP.Sacrificeratio

=(lostGDP)/(totaldisinflation)=19/6.7=2.8percentagepointsofGDPwerelostforeach1percentagepointreductionininflation.Thenatural-ratehypothesisOuranalysisofthecostsofdisinflationandofeconomicfluctuationsintheprecedingchaptersisbasedonthenatural-ratehypothesis:Changesinaggregatedemandaffectoutputandemploymentonlyintheshortrun.Inthelongrun,theeconomyreturnstothelevelsofoutput,employment,andunemploymentdescribedbytheclassicalmodel(Chapters3–9).Analternativehypothesis:Hysteresishysteresis:thelong-lastinginfluenceofhistoryonvariablessuchasthenaturalrateofunemployment.Negativeshocksmayincreaseun,sotheeconomymaynotfullyrecover.Hysteresis:WhynegativeshocksmayincreasethenaturalrateWhileworkerarecyclicallyunemployed,theirskillsmaydeteriorate,andtheymaynotfindajobwhentherecessionends.Cyclicallyunemployedworkersmaylosetheirinfluenceonwagesetting;then,insiders(employedworkers)

maybargainforhigherwagesforthemselves.Result:Thecyclicallyunemployed“outsiders”

maybecomestructurallyunemployedwhentherecessionends.CHAPTERSUMMARY,PART1Twomodelsofaggregatesupplyintheshortrun:sticky-price