国际金融.docx
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国际金融.docx
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国际金融
CHAPTER14
Money,InterestRates,andExchangeRates
ChapterOrganization
MoneyDefined:
ABriefReview
MoneyasaMediumofExchange
MoneyasaUnitofAccount
MoneyasaStoreofValue
WhatisMoney?
HowtheMoneySupplyisDetermined
TheDemandforMoneybyIndividuals
ExpectedReturn
Risk
Liquidity
AggregateMoneyDemand
TheEquilibriumInterestRate:
TheInteractionofMoneySupplyandDemand
EquilibriumintheMoneyMarket
InterestRatesandtheMoneySupply
OutputandtheInterestRate
TheMoneySupplyandtheExchangeRateintheShortRun
LinkingMoney,theInterestRate,andtheExchangeRate
U.S.MoneySupplyandtheDollar/EuroExchangeRate
Europe’sMoneySupplyandtheDollar/EuroExchangeRate
Money,thePriceLevel,andtheExchangeRateintheLongRun
MoneyandMoneyPrices
TheLong-RunEffectsofMoneySupplyChanges
EmpiricalEvidenceonMoneySuppliesandPriceLevels
Box:
InflationandMoneySupplyGrowthinLatinAmerica
MoneyandtheExchangeRateintheLongRun
InflationandExchangeRateDynamics
Short-RunPriceRigidityversusLong-RunPriceFlexibility
Box:
MoneySupplyGrowthandHyperinflationinBolivia
PermanentMoneySupplyChangesandtheExchangeRate
ExchangeRateOvershooting
Summary
ChapterOverview
Thischaptercombinestheforeign-exchangemarketmodelofthepreviouschapterwithananalysisofthedemandforandsupplyofmoneytoprovideamorecompleteanalysisofexchangeratedeterminationintheshortrun.Thechapteralsointroducestheconceptofthelong-runneutralityofmoneywhichallowsanexaminationofexchangeratedynamics.Theseelementsarebroughttogetherattheendofthechapterinamodelofexchangerateovershooting.
Thechapterbeginsbyreviewingtherolesplayedbymoney.Moneysupplyisdeterminedbythecentralbank;foragivenpricelevel,thecentralbank'schoiceofanominalmoneysupplydeterminestherealmoneysupply.Anaggregatedemandfunctionforrealmoneybalancesismotivatedandpresented.Money-marketequilibrium--theequalityofrealmoneydemandandthesupplyofrealmoneybalances--determinestheequilibriuminterestrate.
Afamiliardiagramportrayingmoney-marketequilibriumiscombinedwiththeinterestrateparitydiagrampresentedinthepreviouschaptertogiveasimplemodelofmonetaryinfluencesonexchangeratedetermination.Thedomesticinterestrate,determinedinthedomesticmoneymarket,affectstheexchangeratethroughtheinterestparitymechanism.Thus,anincreaseindomesticmoneysupplyleadstoafallinthedomesticinterestrate.Thehomecurrencydepreciatesuntilitsexpectedfutureappreciationislargeenoughtoequateexpectedreturnsoninterest-bearingassetsdenominatedindomesticcurrencyandinforeigncurrency.Acontractioninthemoneysupplyleadstoanexchangerateappreciationthroughasimilarargument.Throughoutthispartofthechaptertheexpectedfutureexchangerateisstillregardedasfixed.
Theanalysisisthenextendedtoincorporatethedynamicsoflong-runadjustmenttomonetarychanges.Thelongrunisdefinedastheequilibriumthatwouldbemaintainedafterallwagesandpricesfullyadjustedtotheirmarket-clearinglevels.Thusthelong-runanalysisisbasedonthelong-runneutralityofmoney:
Allelseequal,apermanentincreaseinthemoneysupplyaffectsonlythegeneralpricelevel--andnotinterestrates,relativeprices,orrealoutput--inthelongrun.Moneyprices,including,importantly,themoneypricesofforeigncurrencies,moveinthelongruninproportiontoanychangeinthemoneysupply'slevel.Thus,anincreaseinthemoneysupply,forexample,ultimatelyresultsinaproportionalexchangeratedepreciation.
Thecombinationoftheselong-runeffectswiththeshort-runstaticmodelallowsconsiderationofexchangeratedynamics.Inparticular,thelong-runresultsaresuggestiveofhowlong-runexchangerateexpectationschangeafterpermanentmoney-supplychanges.Onedynamicresultwhichemergesfromthismodelisexchangerateovershootinginresponsetoachangeinthemoneysupply.Forexample,apermanentmoney-supplyexpansionleadstoexpectationsofaproportionallong-runcurrencydepreciation.Foreign-exchangemarketequilibriumrequiresaninitialdepreciationofthecurrencylargeenoughtoequateexpectedreturnsonforeignanddomesticbonds.Butbecausethedomesticinterestratefallsintheshortrun,thecurrencymustactuallydepreciatebeyond(andthusovershoot)itsnewexpectedlong-runlevelintheshortruntomaintaininterestparity.AsdomesticpricesriseandM/Pfalls,theinterestratereturnstoitspreviouslevelandtheexchangeratefalls(appreciates)backtoitslong-runlevel,higherthanthestartingpoint,butnotashighastheinitialreaction.
AnswerstoTextbookProblems
1.Areductioninrealmoneydemandhasthesameeffectsasanincreaseinthenominalmoneysupply.Infigure14.1,thereductioninmoneydemandisdepictedasabackwardshiftinthemoneydemandschedulefromL1toL2.TheimmediateeffectofthisisadepreciationoftheexchangeratefromE1toE2,ifthereductioninmoneydemandistemporary,oradepreciationtoE3ifthereductionispermanent.Thelargerimpacteffectofapermanentreductioninmoneydemandarisesbecausethischangealsoaffectsthefutureexchangerateexpectedintheforeignexchangemarket.Inthelongrun,thepricelevelrisestobringtherealmoneysupplyintolinewithrealmoneydemand,leavingallrelativeprices,output,andthenominalinterestratethesameanddepreciatingthedomesticcurrencyinproportiontothefallinrealmoneydemand.Thelong-runlevelofrealbalancesis(M/P2),alevelwheretheinterestrateinthelong-runequalsitsinitialvalue.Thedynamicsofadjustmenttoapermanentreductioninmoneydemandarefromtheinitialpoint1inthediagram,wheretheexchangerateisE1,immediatelytopoint2,wheretheexchangerateisE3andthen,asthepricelevelfallsovertime,tothenewlong-runpositionatpoint3,withanexchangerateofE4.
2.Afallinacountry'spopulationwouldreducemoneydemand,allelseequal,sinceasmallerpopulationwouldundertakefewertransactionsandthusdemandlessmoney.Thiseffectwouldprobablybemorepronouncedifthefallinthepopulationwereduetoafallinthenumberofhouseholdsratherthanafallintheaveragesizeofahouseholdsinceafallintheaveragesizeofhouseholdsimpliesapopulationdeclineduetofewerchildrenwhohavearelativelysmalltransactionsdemandformoneycomparedtoadults.Theeffectontheaggregatemoneydemandfunctiondependsuponnochangeinincomecommensuratewiththechangeinpopulation--else,thechangeinincomewouldserveasaproxyforthechangeinpopulationwithnoeffectontheaggregatemoneydemandfunction.
Figure14-1
3.Equation14-4isMs/P=L(R,Y).Thevelocityofmoney,V=Y/(M/P).Thus,whenthereisequilibriuminthemoneymarketsuchthatmoneydemandequalsmoneysupply,V=Y/L(R,Y).WhenRincreases,L(R,Y)fallsandthusvelocityrises.WhenYincreases,L(R,Y)risesbyasmalleramount(sincetheelasticityofaggregatemoneydemandwithrespecttorealoutputislessthanone)andthefractionY/L(R,Y)rises.Thus,velocityriseswitheitheranincreaseintheinterestrateoranincreaseinincome.Sinceanincreaseininterestratesaswellasanincreaseinincomecausetheexchangeratetoappreciate,anincreaseinvelocityisassociatedwithanappreciationoftheexchangerate.
4.AnincreaseindomesticrealGNPincreasesthedemandformoneyatanynominalinterestrate.Thisisreflectedinfigure14-2asanoutwardshiftinthemoneydemandfunctionfromL1toL2.TheeffectofthisistoraisedomesticinterestratesfromR1toR2andtocauseanappreciationofthedomesticcurrencyfromE1toE2.
5.Justasmoneysimplifieseconomiccalculationswithinacountry,useofavehiclecurrencyforinternationaltransactionsreducescalculationcosts.Moreimportantly,themorecurrenciesusedintrade,thecloserthetradebecomestobarter,sincesomeonewhoreceivespaymentinacurrencyshedoesnotneedmustthensellitforacurrencysheneeds.Thisprocessismuchlesscostlywhenthereisareadymarketinwhichanynonvehiclecurrencycanbetradedagainstthevehiclecurrency,whichthenfulfillstheroleofagenerallyacceptedmediumofexchange.
Figure14-2
6.Currencyreformsareofteninstitutedinconjunctionwithotherpolicieswhichattempttobringdowntherateofinflation.Theremaybeapsychologicaleffectofintroducinganewcurrencyatthemomentofaneconomicpolicyregimechange,aneffectthatallowsgovernmentstobeginwitha"cleanslate"andmakespeoplereconsidertheirexpectationsconcerninginflation.Experienceshows,however,thatsuchpsychologicaleffectscannotmakeastabilizationplansucceedifitisnotbackedupbyconcretepoliciestoreducemonetarygrowth.
7.Theinterestrateatthebeginningandattheendofthisexperimentareequal.Theratioofmoneytoprices(thelevelofrealbalances)mustbehigherwhenfullemploymentisrestoredthanintheinitialstatewherethereisunemployment:
themoney-marketequilibriumconditioncanbesatisfiedonlywithahigherlevelofrealbalancesifGNPishigher.Thus,thepricelevelrises,butbylessthantwiceitsoriginallevel.Iftheinterestratewereinitiallybelowitslong-runlevel,thefinalresultwillbeonewithhigherGNPandhigherinterestrates.Here,thefinallevelofrealbalancesmaybehigherorlowerthantheinitiallevel,andwecannotunambiguouslystatewhetherthepricelevelhasmorethandoubled,lessthandoubled,orexactlydoubled.
8.The1984-1985moneysupply
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