中文曼昆宏观经济学第七版讲义课件.ppt

1、accounting identities for the open economythe small open economy modelwhat makes it“small”how the trade balance and exchange rate are determinedhow policies affect trade balance&exchange rateImports and exports(%of GDP),20192CHAPTER 5 The Open EconomyIn an open economy,spending need not equal output

2、saving need not equal investment3CHAPTER 5 The Open EconomyPreliminariesEX=exports=foreign spending on domestic goodsIM=imports=C f+I f+G f=spending on foreign goodsNX=net exports(a.k.a.the“trade balance”)=EX IMdfCCCdfIIIdfGGGsuperscripts:d=spending on domestic goodsf=spending on foreign goods4CHAPT

3、ER 5 The Open EconomyGDP=expenditure on domestically produced g&sdddYCIGEX()()()fffCCIIGGEX()fffCIGEXCIGCIGEXIMCIGNX5CHAPTER 5 The Open EconomyThe national income identity in an open economyY=C+I+G+NXor,NX =Y (C +I +G)net exportsdomestic spendingoutput6CHAPTER 5 The Open EconomyTrade surpluses and d

4、eficitstrade surplus:output spending and exports imports Size of the trade surplus=NXtrade deficit:spending output and imports exports Size of the trade deficit=NXNX =EX IM =Y (C +I +G)7CHAPTER 5 The Open EconomyInternational capital flowsNet capital outflow=S I=net outflow of“loanable funds”=net pu

5、rchases of foreign assets the countrys purchases of foreign assets minus foreign purchases of domestic assetsWhen S I,country is a net lenderWhen S I,country is a net borrower8CHAPTER 5 The Open EconomyThe link between trade&cap.flowsNX =Y (C +I +G)implies NX =(Y C G)I =S Itrade balance=net capital

6、outflowThus,a country with a trade deficit(NX 0)is a net borrower(S 0,S =0,net capital outflow and NX fall by the amount I NX2NX1*rI 1I 2SI(r)223CHAPTER 5 The Open EconomyThe nominal exchange ratee =nominal exchange rate,the relative price of domestic currency in terms of foreign currency(e.g.Yen pe

7、r Dollar)A few exchange rates,as of 11/01/2019countryexchange rateEuro area0.72 Euro/$Indonesia8,930 Rupiahs/$Japan80.6 Yen/$Mexico12.4 Pesos/$Russia30.8 Rubles/$South Africa7.0 Rand/$U.K.0.62 Pounds/$25CHAPTER 5 The Open EconomyThe real exchange rate =real exchange rate,the relative price of domest

8、ic goods in terms of foreign goods(e.g.Japanese Big Macs per U.S.Big Mac)the lowercase Greek letter epsilon26CHAPTER 5 The Open EconomyUnderstanding the units of(Yen per$)($per unit U.S.goods)Yen per unit Japanese goodsUnits of Japanese goods per unit of U.S.goodsYen per unit U.S.goodsYen per unit J

9、apanese goods*ePP27CHAPTER 5 The Open Economyone good:Big Macprice in Japan:P*=200 Yenprice in USA:P =$2.50nominal exchange rate e=120 Yen/$To buy a U.S.Big Mac,someone from Japan would have to pay an amount that could buy 1.5 Japanese Big Macs.1202 501 5200 YenePP*$.McZample 28CHAPTER 5 The Open Ec

10、onomy in the real world&our modelIn the real world:We can think of as the relative price of a basket of domestic goods in terms of a basket of foreign goodsIn our macro model:Theres just one good,“output.”So is the relative price of one countrys output in terms of the other countrys output29CHAPTER

11、5 The Open EconomyHow NX depends on U.S.goods become more expensive relative to foreign goods EX,IM NXU.S.net exports and the real exchange rate,1973-2009NX(%of GDP)Index(March 1973=100)020406080100120140-8%-6%-4%-2%0%2%4%197019751980198519902019200020192019Net exports(left scale)Trade-weighted real

12、 exchange rate index31CHAPTER 5 The Open EconomyThe net exports functionThe net exports function reflects this inverse relationship between NX and :NX =NX()32CHAPTER 5 The Open EconomyThe NX curve for the U.S.0NXNX()1When is relatively low,U.S.goods are relatively inexpensiveNX(1)so U.S.net exports

13、will be high33CHAPTER 5 The Open EconomyThe NX curve for the U.S.0NXNX()2At high enough values of,U.S.goods become so expensive that NX(2)we export less than we import34CHAPTER 5 The Open EconomyHow is determinedThe accounting identity says NX=S IWe saw earlier how S I is determined:S depends on dom

14、estic factors(output,fiscal policy variables,etc)I is determined by the world interest rate r*So,must adjust to ensure()()*NX SI r35CHAPTER 5 The Open EconomyHow is determinedNeither S nor I depend on,so the net capital outflow curve is vertical.NXNX()1(*)SI r adjusts to equate NX with net capital o

15、utflow,S I.1NX 136CHAPTER 5 The Open EconomyInterpretation:supply and demand in the foreign exchange marketdemand:Foreigners need dollars to buy U.S.net exports.NXNX()1(*)SI rsupply:Net capital outflow(S I)is the supply of dollars to be invested abroad.1NX 137CHAPTER 5 The Open EconomyNext,four expe

16、riments:1.Fiscal policy at home2.Fiscal policy abroad3.An increase in investment demand(exercise)4.Trade policy to restrict imports38CHAPTER 5 The Open Economy1.Fiscal policy at homeA fiscal expansion reduces national saving,net capital outflow,and the supply of dollars in the foreign exchange marke

17、t causing the real exchange rate to rise and NX to fall.NXNX()1(*)SI r 1NX 1NX 22(*)SI r 239CHAPTER 5 The Open Economy2.Fiscal policy abroadAn increase in r*reduces investment,increasing net capital outflow and the supply of dollars in the foreign exchange market causing the real exchange rate to fa

18、ll and NX to rise.NXNX()11(*)SI rNX 1 121()*SI r 2NX 2NOW YOU TRY:3.Increase in investment demandNX()111SINX 1NXDetermine the impact of an increase in investment demand on net exports,net capital outflow,and the real exchange rateANSWERS:3.Increase in investment demandAn increase in investment reduc

19、es net capital outflow and the supply of dollars in the foreign exchange market NX()111SINX 121SINX 2 2NXcausing the real exchange rate to rise and NX to fall.42CHAPTER 5 The Open Economy4.Trade policy to restrict importsNXNX()1SINX1 1NX()2At any given value of,an import quota IM NX demand for dolla

20、rs shifts rightTrade policy doesnt affect S or I,so capital flows and the supply of dollars remain fixed.243CHAPTER 5 The Open Economy4.Trade policy to restrict importsNXNX()1SINX1 1NX()2Results:0(demand increase)NX =0(supply fixed)IM 0(policy)EX 0(rise in )244CHAPTER 5 The Open EconomyThe determina

21、nts of the nominal exchange rateStart with the expression for the real exchange rate:*ePPSolve for the nominal exchange rate:*PeP45CHAPTER 5 The Open EconomyThe determinants of the nominal exchange rate(*,)ML rYP()()*NX SI rSo e depends on the real exchange rate and the price levels at home and abro

22、adand we know how each of them is determined:*PeP*(*,)ML rYP46CHAPTER 5 The Open EconomyThe determinants of the nominal exchange rateRewrite this equation in growth rates(see“arithmetic tricks for working with percentage changes,”Chap 2):*PeP*ePPePP *For a given value of,the growth rate of e equals

23、the difference between foreign and domestic inflation rates.Inflation differentials and nominal exchange rates for a cross section of countries%change in nominal exchange rateinflation differentialIcelandMexicoU.K.S.KoreaJapanSingaporeCanadaAustraliaS.AfricaPakistan48CHAPTER 5 The Open EconomyPurcha

24、sing Power Parity(PPP)Two definitions:A doctrine that states that goods must sell at the same(currency-adjusted)price in all countries.The nominal exchange rate adjusts to equalize the cost of a basket of goods across countries.Reasoning:arbitrage,the law of one price49CHAPTER 5 The Open EconomyPurc

25、hasing Power Parity(PPP)PPP:e P =P*Cost of a basket of domestic goods,in foreign currency.Cost of a basket of domestic goods,in domestic currency.Cost of a basket of foreign goods,in foreign currency.Solve for e:e =P*/P PPP implies that the nominal exchange rate between two countries equals the rati

26、o of the countries price levels.50CHAPTER 5 The Open EconomyPurchasing Power Parity(PPP)If e=P*/P,then*1PPPePPPand the NX curve is horizontal:NXNX =1S IUnder PPP,changes in(S I)have no impact on or e.51CHAPTER 5 The Open EconomyDoes PPP hold in the real world?No,for two reasons:1.International arbit

27、rage not possible.nontraded goods transportation costs2.Different countries goods not perfect substitutes.Yet,PPP is a useful theory:Its simple&intuitive.In the real world,nominal exchange rates tend toward their PPP values over the long run.no changeno change no changeno change 129.4-2.019.46.317.4

28、3.9115.1-0.319.91.119.62.2closed economysmall open economyactual changeNXIrSG T1980s1970sData:decade averages;all except r and are expressed as a percent of GDP;is a trade-weighted index.CASE STUDY:The Reagan deficits revisited53CHAPTER 5 The Open EconomyThe U.S.as a large open economySo far,weve le

29、arned long-run models for two extreme cases:closed economy(chap.3)small open economy(chap.5)A large open economy like the U.S.fallsbetween these two extremes.The results from large open economy analysis are a mixture of the results for the closed&small open economy cases.For example 54CHAPTER 5 The

30、Open EconomyNXIrlarge open economysmall open economyclosed economyA fiscal expansion in three modelsfalls,but not as much as in small open economyfallsno changefalls,but not as much as in closed economynochangefallsrises,but not as much as in closed economynochangerisesA fiscal expansion causes nati

31、onal saving to fall.The effects of this depend on openness&size:Net exports-the difference between exports and importsa countrys output(Y)and its spending(C+I+G)Net capital outflow equalspurchases of foreign assets minus foreign purchases of the countrys assetsthe difference between saving and inves

32、tmentNational income accounts identities:Y =C +I +G +NXtrade balance NX =S I net capital outflowImpact of policies on NX:NX increases if policy causes S to rise or I to fallNX does not change if policy affects neither S nor I.Example:trade policyExchange ratesnominal:the price of a countrys currency

33、 in terms of another countrys currencyreal:the price of a countrys goods in terms of another countrys goodsThe real exchange rate equals the nominal rate times the ratio of prices of the two countries.How the real exchange rate is determinedNX depends negatively on the real exchange rate,other thing

34、s equalThe real exchange rate adjusts to equate NX with net capital outflowHow the nominal exchange rate is determinede equals the real exchange rate times the countrys price level relative to the foreign price level.For a given value of the real exchange rate,the percentage change in the nominal exchange rate equals the difference between the foreign&domestic inflation rates.