ShortRun(国际金融(香港大学,WONGKaFu)

1OutputandExchangeRateintheShortRunWONGKaFu28thFebruary20002AggregatedemandfordomesticgoodsD=C+I+G+CA=C+I+G+EX-IM3ConsumptionofdomesticgoodsC=C(Yd),dC/dYd0=C(Y-T)Yd=disposableincome4ConsumptionbyhomecitizensConsumptionConsumptionofdomesticgoodsI.e.,CConsumptionofforeigngoodsI.e.,IM5CurrentaccountCA=CA(qH/F,Yd)=EX(qH/F,Yd)-IM(qH/F,Yd)qH/F=(EH/FPF)/PHTheunitsofhomegoodbasketperforeigngoodbasket.Forcompleteness,wecanalsowriteCA=CA(qH/F,Yd,YFd),YFd=Foreigndisposableincome6CA/qH/F0(CAmeasuredindomesticoutput)qH/FEXIMvolumepriceIM?CAAssumed7CA/Yd0YEXIMCA8AggregateDemandfordomesticgoodsD=C+I+G+CA=C(Y-T)+I+G+CA(qH/F,Y-T)=D(qH/F,Y-T,I,G)91D/Y0YCCADAlthoughanincreaseinYisexpectedtoraisethetotalconsumption(IMandC)byanunknownamount,weassumetheincreaseinCislargerthantheincreaseinIM.Becauseimportincreasesbutexportremainsunchanged101D/Y0Output(realincome),YAggregatedemand,DD(qH/F,Y-T,I,G)11DeterminationofoutputintheshortrunOutput(realincome),YAggregatedemand,DD(qH/F,Y-T,I,G)D=Y12EffectofanincreaseinEonshort-runoutputequilibriumOutput(realincome),YAggregatedemand,DD=YD(EH/F2PF/PH,Y-T,I,G)Homecurrencydepreciation,i.e.,E2E1Y1Y2D(EH/F1PF/PH,Y-T,I,G)13Output,YOutput,YD=YD(EH/F1PF/PH,Y-T,I,G)D(EH/F2PF/PH,Y-T,I,G)E1E2DEDDY1Y2TheDDschedule14Output,YOutput,YD=YD(EH/F1PF/PH,Y-T,I,G)D(EH/F2PF/PH,Y-T,I,G)E1E2DEDDY1Y2Ifwewereat3...33’15Output,YOutput,YD=YD(EH/FPF/PH,Y-T,I,G1)D(EH/FPF/PH,Y-T,I,G2)EDEDD1Y1Y2EffectofanGincreaseDD216ThefollowingchangeshavesimilareffectonDDscheduleAnincreaseinGAdecreaseinTAnincreaseinIAdecreaseinPHAnincreaseinPFAnautonomousincreaseinconsumptionAshiftofdemandfromforeigntodomesticgoods17Rateofreturn(inhomecurrency)ExpectedreturnonforeigndepositReturnonhomedepositHD/FDexchangerate0(MsH/PH)1L(RH,YH)11’EH/F1RealmoneyholdingsRelationshipbetweenExchangerateandmoneysupply18Rateofreturn(inhomecurrency)ExpectedreturnonforeigndepositReturnonhomedepositHD/FDexchangerate0(MsH/PH)1L(RH,YH1)11’EH/F1RealmoneyholdingsEffectofanincreaseinoutputL(RH,YH2)EH/F222’19AAOutput,YExchangeRate,EE1E2Y1Y220AAOutput,YExchangeRate,EE1E2Y1Y23Ifwewereat3...21Rateofreturn(inhomecurrency)ExpectedreturnonforeigndepositReturnonhomedepositHD/FDexchangerate0(MsH/PH)1L(RH,YH1)11’EH/F1RealmoneyholdingsIfwewereat3’…..L(RH,YH2)EH/F222’3’22FactorsthatshifttheAAscheduleAchangeinrealmoneysupplyAchangeinMsAchangeinPAchangeinEeAchangeinRFAchangeinL(RH,Y)23Output,YExchangeRate,EDDAAY1E1Short-runequilibrium:TheintersectionofDDandAA124Output,YExchangeRate,EDDAAY1E1Ifwewereat2…...1E3E223Note:Assetmarketadjustmuchfasterthanoutput25TemporarychangesinmonetaryandfiscalpolicyTemporarypolicyshiftsareshiftsthatthepublicexpectstobereversedinthenearfuture.Atemporarypolicyshiftdoesnotaffectthelong-runexpectedexchangerate,EH/Fe.26ApermanentincreaseinmoneysupplyTimeMoneysupplyt027AtemporaryincreaseinmoneysupplyTimeMoneysupplyt0t128Output,YExchangeRate,EDDAA1Y1E1Atemporaryincreaseinmoneysupply12AA2Y2E229AtemporaryFiscalexpansion(increaseingovernmentexpenditure)TimeGovernmentexpedituret0t130Output,YExchangeRate,EDD1AAY1E1ATemporaryFiscalExpansion1DD22E2Y231Atemporaryunderfullemploymentcausedbyatemporaryfallinworlddemandtherestorationoffullemploymentand32AtemporaryfallinworlddemandTimeWorlddemandt0t133Output,YExchangeRate,EDD2AAY2E2Atemporaryfallinworlddemand2DD11E1Yf34TwowaystorestorefullemploymentAtemporaryfiscalpolicyAtemporarymonetarypolicy35Output,YExchangeRate,EDD2AAY2E2Restoringfullemploymentbyatemporaryfiscalexpansion2DD11E1Yf36Output,YExchangeRate,EDD2AA1Y2E2Restoringfullemploymentbyatemporarymonetaryexpansion2DD11E1YfE33AA237DifferenteffectsintheuseoffiscalandmonetarytoolstorestorefullemploymentFiscaltemporaryincreaseinG:purchasedomesticgoodsbudgetdeficitExchangeratereturnstopre-shocklevelMonetarytemporaryincreaseinmoneysupplyinterestratedecreasesExchangerate(E)higherthanpre-shocklevelExchangeratealsohigherthanthecasewithoutanystabilizingpolicy.38Atemporaryunderfullemploymentcausedbyatemporaryincreaseinmoneydemandtherestorationoffullemploymentand39AtemporaryincreaseinmoneydemandTimeMoneydemandt0t140Output,YExchangeRate,EDD1AA2Y2E2Atemporaryincreaseinmoneydemand2YfE11AA141TwowaystorestorefullemploymentAtemporaryfiscalpolicyAtemporarymonetarypolicy42Output,YExchangeRate,EDD1AA2Y2E22YfE11AA1Restoringfullemploymentbyatemporarymonetaryexpansion43Output,YExchangeRate,EDD1AA2Y2E2Restoringfullemploymentbyatemporaryfiscalexpansion2DD23E3YfE11AA144PermanentshiftsinmonetaryandfiscalpolicyApermanentpolicyshiftaffectsnotonlythevalueofthegovernment’spolicyinstrument(themoneysupply,governmentspending,ortaxes)butalsothelong-runexchangerateandhenceexpectationsaboutfutureexchangerates45Apermanentincreaseinmoneysupply46ApermanentincreaseinmoneysupplyTimeMoneysupplyt047Rateofreturn(inhomecurrency)ExpectedreturnonforeigndepositReturnonhomedepositHD/FDexchangerate0(MsH1/PH)EH/F3RealmoneyholdingsEffectofapermanentincreaseinmoneysupplyL(RH,YH)EH/F1EH/F2(MsH2/PH)48Output,YExchangeRate,EDDAA1YfE1Apermanentincreaseinmoneysupply12AA