普格尔_国际经济学课件chapter24 floating-exchange-rates-and-internal-balance

1、Feng zhijianJ HengYang Normal University of Economics & ManagementJ J QQ：549206081CHAPTER 24Floating Exchange Rates and Internal Balance一、Monetary policy with floating exchange rates With floating exchange rates, Monetary policy exerts a strong influence over domestic product and incom

2、e. Figure 10.1Figure 10.1Money Expansion: Floating Exchange Rate Under floating exchange rates, monetary policy is powerful in its effects on internal balance The induced change in the exchange rate reinforces the domestic effects of monetary policy. This general conclusion holds whatever the degree

3、 of capital mobility. How large are the follow-on effects from the currency depreciation? A model of the global economy developed by the OECD provide some answers The induced depreciation of the countrys currency increases the effect of the monetary expansion by about 50 percent on average.Figure 10

4、.2Expansionary Monetary Policy: IS-LM-FE二、Fiscal policy with floating exchange rates Figure 10.3Expansionary Fiscal PolicyFigure 10.3Expansionary Fiscal Policy: Floating Exchange RateFigure 10.4 Expansionary Fiscal Policy: IS-LM-FE The “feedback” effects on the domestic economy depend on which way t

5、he exchange rate changes. If at first appreciates, then the country loses price competitiveness, the expansionary effects is reduced by “international crowding out”. If depreciates, the enhanced price competitiveness and resulting increase in the CA give a further trade-based stimulus to domestic pr

6、oduction. Discuss: why are U.S. trade deficits so big?三、Shocks to the economy Internal shocks Domestic Monetaryshock Domestic spending shocks External shocks International capital-flow shocks International trade shocksFigure 10.5 An adverse international capital-flow shockInterest rate = iLMFEFE40.0

7、70.06E4FEE0IS4IS110120Domestic product = YFigure 10.6 An adverse international trade shockLMFEFEE05ISISTInterest rate = i0.060.05100110Domestic product = YFigure 10.7Effects of Shocks on Domestic Product四、Internal imbalance and policy responses With floating exchange rates a change in the exchange r

8、ate can achieve external balance following a shock. but cant ensure to achieve internal balance. A depreciation tends to expand the countrys economy. If the country begins with excessive unemployment before the exchange rate change, then the expansionary thrust of the depreciation is welcome. Govern

9、ment monetary or fiscal policy can be used to address any internal imbalances that do arise. The size of the change in policy needed to address the imbalance depends on the change in the exchange rate that will occur.五、International Macroeconomic policy coordination The policies adopted by one count

10、ry have effects on other countries. A policy change that benefits the country can harm other countries. Each country acting individually may fail to make a policy change whose benefits mostly go to other countries. International macroeconomic policy coordination is the joint determination of several

11、 countries macroeconomic policies to improve joint performance. If the benefits of international policy coordination seem clear, why do we actually see rather little of it? The goals of different countries may not be compatible. The benefits of international policy coordination may actually be small in many situation.summary Monetary policy with floatin