复旦大学【克鲁格曼《国际经济学》第六版英文课件】CH19
国际经济学 (19)
C H A P T E R 19Macroeconomic Policy and Coordination under FloatingExchange Rates浮动汇率下的宏观经济政策和协调A s the Bretton Woods system of fixed exchange rates began to show signs of strain in the late 1960s, many economists recommended that countries allow currency values to be determined freely in the foreign exchange market. When the governments of the industrialized countries adopted floating exchange rates early in 1973, they viewed their step as a temporary emergency measure and were not consciously following the advice of the economists then advocating a permanent floating-rate system. So far, however, it has proved impossible to put the fixed-rate system back together again: The dollar exchange rates of the industrialized countries have continued to float since 1973.The advocates of floating saw ft as a way out of the conflicts between internal and external balance that often arose under the rigid Bretton Woods exchange rates. By the mid-1980s, however, economists and policymakers had become more skeptical about the benefits of an international monetary system based on floating rates. Some critics describe the post-1973 currency arrangements as an international monetary "nonsystem,"a freefor- all in which national macroeconomic policies are frequently at odds. Many observers now think that the current exchange rate system is badly in need of reform. Why has the performance of floating rates been so disappointing, and what direction should reform of the current system take? In this chapter our models of fixed and floating exchange rates are applied to examine the recent performance of floating rates and to compare the macroeconomic policy problems of different exchange rate regimes.Case for Floating Exchange RatesAs international currency crises of increasing scope and frequency erupted in the late 1960s, most economists began advocating greater flexibility of exchange rates. Many argued that a system of floating exchange rates (one in which central banks did not intervene in the foreign exchange market to fix rates) would not only automatically ensure exchange rate flexibility but would also produce several other benefits for the world economy. The case for floating exchange rates rested on three major claims:1. Monetary policy autonomy. If central banks were no longer obliged to intervene in currency markets to fix exchange rates, governments would be able to use monetary policy to reach internal and external balance. Furthermore, no country would be forced to import inflation (or deflation) from abroad.2. Symmetry. Under a system of floating rates the inherent asymmetries of Bretton Woods would disappear and the United States would no longer be able to set world monetary conditions all by itself. At the same time, the United States would have the same opportunity as other countries to influence its exchange rate against foreign currencies.3. Exchange rates as automatic stabilizers. Even in the absence of an active monetary policy, the swift adjustment of market-determined exchange rates would help countriesmaintain internal and external balance in the face of changes in aggregate demand. The long and agonizing periods of speculation preceding exchange rate realignments under the Bretton Woods rules would not occur under floating.Monetary Policy AutonomyUnder the Bretton Woods fixed-rate system, countries other than the United States had little scope to use monetary policy to attain internal and external balance. Monetary policy was weakened by the mechanism of offsetting capital flows (discussed in Chapter 17). A central bank purchase of domestic assets, for example, would put temporary downward pressure on the domestic interest rate and cause the domestic currency to weaken in the foreign exchange market. The exchange rate then had to be propped up through central bank sales of official foreign reserves. Pressure on the interest and exchange rates disappeared, however, only when official reserve losses had driven the domestic money supply back down to its original level. Thus, in the closing years of fixed exchange rates, central banks imposed increasingly stringent restrictions on international payments to keep control over their money supplies. These restrictions were only partially successful in strengthening monetary policy, and they had the damaging side effect of distorting international trade.Advocates of floating rates pointed out that removal of the obligation to peg currency values would restore monetary control to central banks. If, for example, the central bank faced unemployment and wished to expand its money supply in response, there would no longer be any legal barrier to the currency depreciation this would cause. As in the analysis of Chapter 16, the currency depreciation would reduce unemployment by lowering the relative price of domestic products and increasing world demand for them. Similarly, the central bank of an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflows would undermine its stabilization effort. Enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments.Advocates of floating also argued that floating rates would allow each country to choose its own desired long-run inflation rate rather than passively importing the inflation rate established abroad. We saw in the last chapter that a country faced with a rise in the foreign price level will be thrown out of balance and ultimately will import the foreign inflation if it holds its exchange rate fixed: By the end of the 1960s many countries felt that they were importing inflation from the United States. By revaluing its currency—that is, by lowering the domestic currency price of foreign currency—a country can insulate itself completely from an inflationary increase in foreign prices, and so remain in internal and external balance. One of the most telling arguments in favor of floating rates was their ability, in theory, to bring about automatically exchange rate changes that insulate economies from ongoing foreign inflation.The mechanism behind this insulation is purchasing power parity (Chapter 15). Recall that when all changes in the world economy are monetary, PPP holds true in the long run: Exchange rates eventually move to offset exactly national differences in inflation. If U.S. monetary growth leads to a long-run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the long-run DM price of the dollar will be halved. This nominal exchange rate change leaves the real exchange rate between thedollar and DM unchanged and thus maintains Germany's internal and external balance. In other words, the long-run exchange rate change predicted by PPP is exactly the change that insulates Germany from U.S. inflation.A money-induced increase in U.S. prices also causes an immediate appreciation of foreign currencies against the dollar when the exchange rate floats. In the short run, the size of this appreciation can differ from what PPP predicts, but the foreign exchange speculators who might have mounted an attack on fixed dollar exchange rates speed the adjustment of floating rates. Since they know foreign currencies will appreciate according to PPP in the long run, they act on their expectations and push exchange rates in the direction of their long-run levels.Countries operating under the Bretton Woods rules were forced to choose between matching U.S. inflation to hold their dollar exchange rates fixed or deliberately revaluing their currencies in proportion to the rise in U.S. prices. Under floating, however, the foreign exchange market automatically brings about the exchange rate changes that shield countries from U.S. inflation. Since this outcome does not require any government policy decisions, the revaluation crises that occurred under fixed exchange rates are avoided.1SymmetryThe second argument put forward by the advocates of floating was that abandonment of the Bretton Woods system would remove the asymmetries that caused so much international disagreement in the 1960s and early 1970s. There were two main asymmetries, both the result of the dollar's central role in the international monetary system. First, because central banks pegged their currencies to the dollar and accumulated dollars as international reserves, the U.S. Federal Reserve played the leading role in determining the world money supply and central banks abroad had little scope to determine their own domestic money supplies. Second, any foreign country could devalue its currency against the dollar in conditions of "fundamental disequilibrium," but the system's rules did not give the United States the option of devaluing against foreign currencies. Thus, when the dollar was at last devalued in December 1971, it was only after a long and economically disruptive period of multilateral negotiation.A system of floating exchange rates, its proponents argued, would do away with these asymmetries. Since countries would no longer peg dollar exchange rates or need to hold dollar reserves for this purpose, each would be in a position to guide monetary conditions at home. For the same reason, the United States would not face any special obstacle to altering its exchange rate through monetary or fiscal policies. All countries' exchange rates would be determined symmetrically by the foreign exchange market, not by government decisions.2Exchange Rates as Automatic Stabilizers1Countries can also avoid importing undesired deflation by floating, since the analysis above goes through, in reverse, for a fall in the foreign price level.2The symmetry argument is not an argument against fixed-rate systems in general, but an argument against the specific type of fixed-exchange rate system that broke down in the early 1970s. As we saw in Chapter 17, a fixed-rate system based on a gold standard can be completely symmetric. The creation of an artificial reserve asset, the SDR, in the late 1960s was an attempt to attain the symmetry of a gold standard without the other drawbacks of that system.The third argument in favor of floating rates concerned their ability, theoretically, to promote swift and relatively painless adjustment to certain types of economic changes. One such change, previously discussed, is foreign inflation. Figure 19-1, which uses the DD-AA model presented in Chapter 16, examines another type of change by comparing the economy's response under a fixed and a floating exchange rate to a temporary fall in foreign demand for its exports.A fall in demand for the home country's exports reduces aggregate demand for every level of the exchange rate, E, and so shifts the DD schedule leftward from DD] to DD2. (Recall that the DD schedule shows exchange rate and output pairs for which aggregate demand equals aggregate output.) Figure 19-la shows how this shift affects the economy's equilibrium when the exchange rate floats. Because the demand shift is assumed to be temporary, it does not change the long-run expected exchange rate and so does not move the asset market equilibrium schedule A A1. (Recall that the/\/\ schedule shows exchange rate and output pairs at which the foreign exchange market and the domestic money market are in equilibrium.) The economy's short-run equilibrium is therefore at point 2; compared with the initial equilibrium at point 1, the currency depreciates (E rises) and output falls. Why does the exchange rate rise from El to E21 As demand and output fall, reducing the transactions demand for money, the home interest rate must also decline to keep the money market in equilibrium. This fall in the home interest rate causes the domestic currency to depreciate in the foreign exchange market, and the exchange rate therefore rises from El to E2.The effect of the same export demand disturbance under a fixed exchange rate is shown in Figure 19-1 b. Since the central bank must prevent the currency depreciation that occurs under a floating rate, it buys domestic money with foreign currency, an action that contracts the money supply and shifts AAl left to AA2. The new short-run equilibrium of the economy under a fixed exchange rate is at point 3, where output equals Y3. Figure 19-1 shows that output actually falls more under a fixed rate than under a floating rate, dropping all the way to K3 rather than Y2. In other words, the movement of the floating exchange rate stabilizes the economy by reducing the shock's effect on employment relative to its effect under a fixed rate. Currency depreciation in the floating rate case makes domestic goods and services cheaper when the demand for them falls, partially offsetting the initial reduction in demand. In addition to reducing the departure from internal balance caused by the fall in export demand, the depreciation reduces the current account deficit that occurs under fixed rates by making domestic products more competitive in international markets.We have considered the case of a transitory fall in export demand, but even stronger conclusions can be drawn when there is a permanent fall in export demand. In this case, the expected exchange rate Ee also rises and AA shifts upward as a result. A permanent shock causes a greater depreciation than a temporary one, and the movement of the exchange rate therefore cushions domestic output more when the shock is permanent. Under the Bretton Woods system, a fall in export demand such as the one shown in Figure 19-lb would, if permanent, have led to a situation of "fundamental disequilibrium" calling for a devaluation of the currency or a long period of domestic unemployment as export prices fell. Uncertainty about the government's intentions would have encouraged speculative capital outflows, further worsening the situation by depleting central bankreserves and contracting the domestic money supply at a time of unemployment. Advocates of floating rates pointed out that the foreign exchange market wouldautomatically bring about the required real currency depreciation through a movement in the nominal exchange rate. This exchange rate change would reduce or eliminate the need to push the price level down through unemployment, and because it would occurimmediately there would be no risk of speculative disruption, as there would be under a fixed rate.The Case Against Floating Exchange RatesThe experience with floating exchange rates between the world wars had left many doubts about how they would function in practice if the Bretton Woods rules were scrapped. Some economists were skeptical of the claims advanced by the advocates of floating and predicted instead that floating rates would have adverse consequences for the world economy. The case against floating rates rested on five main arguments:1. Discipline. Central banks freed from the obligation to fix their exchange rates might embark on inflationary policies. In other words, the "discipline" imposed on individual countries by a fixed rate would be lost.2. Destabilizing speculation and money market disturbances. Speculation on changes in exchange rates could lead to instability in foreign exchange markets, and this instability, in turn, might have negative effects on countries' internal and external balances. Further,disturbances to the home money market could be more disruptive under floating thanunder a fixed rate.3. Injury to international trade and investment. Floating rates would make relative international prices more unpredictable and thus injure international trade and investment.4. Uncoordinated economic policies. If the Bretton Woods rules on exchange rate adjustment were abandoned, the door would be opened to competitive currency practices harmful to the world economy. As happened during the interwar years, countries might adopt policies without considering their possible beggar-thy-neighbor aspects. All countries would suffer as a result.5. The illusion of greater autonomy. Floating exchange rates would not really give countries more policy autonomy. Changes in exchange rates would have such pervasive macroeconomic effects that central banks would feel compelled to intervene heavily in foreign exchange markets even without a formal commitment to peg. Thus, floating would increase the uncertainty in the economy without really giving macroeconomic policy greater freedom.DisciplineProponents of floating rates argue they give governments more freedom in the use of monetary policy. Some critics of floating rates believed that floating rates would lead to license rather than liberty: Freed of the need to worry about losses of foreign reserves, governments might embark on overexpansionary fiscal or monetary policies, falling into the inflation bias trap discussed in Chapter 16 (p. XXX). Factors ranging from political objectives (such as stimulating the economy in time to win an election) to simple incompetence might set off an inflationary spiral. In the minds of those who made the discipline argument, the German hyperinflation of the 1920s epitomized the kind of monetary instability that floating rates might allow.The pro-floaters' response to the discipline criticism was that a floating exchange rate would bottle up inflationary disturbances within the country whose government was misbehaving; it would then be up to its voters, if they wished, to elect a government with better policies. The Bretton Woods arrangements ended up imposing relatively little discipline on the United States, which certainly contributed to the acceleration of worldwide inflation in the late 1960s. Unless a sacrosanct link between currencies and a commodity such as gold were at the center of a system of fixed rates, the system would remain susceptible to human tampering. As discussed in Chapter 17, however, commodity-based monetary standards suffer from difficulties that make them undesirable in practice.Destabilizing Speculation and Money Market DisturbancesAn additional concern arising out of the experience of the interwar period was the possibility that speculation in currency markets might fuel wide gyrations in exchange rates. If foreign exchange traders saw that a currency was depreciating, it was argued, they might sell the currency in the expectation of future depreciation regardless of the currency's longer-term prospects; and as more traders jumped on the bandwagon by selling the currency the expectations of depreciation would be realized. Suchdestabilizing speculation would tend to accentuate the fluctuations around the exchange rate's long-run value that would occur normally as a result of unexpected economic disturbances. Aside from interfering with international trade, destabilizing sales of a weak currency might encourage expectations of future inflation and set off a domestic wage-price spiral that would encourage further depreciation. Countries could be caught in a "vicious circle" of depreciation and inflation that might be difficult to escape. Advocates of floating rates questioned whether destabilizing speculators could stay in business. Anyone who persisted in selling a currency after it had depreciated below its longrun value or in buying a currency after it had appreciated above its long-run value was bound to lose money over the long term. Destabilizing speculators would thus be driven from the market, the pro-floaters argued, and the field would be left to speculators who had avoided long-term losses by speeding the adjustment of exchange rates toward their longrun values.Proponents of floating also pointed out that capital flows could behave in a destabilizing manner under fixed rates. An unexpected central bank reserve loss might set up expectations of a devaluation and spark a reserve hemorrhage as speculators dumped domestic currency assets. Such capital flight might actually force an unnecessary devaluation if government measures to restore confidence proved insufficient.A more telling argument against floating rates is that they make the economy more vulnerable to shocks coming from the domestic money market. Figure 19-2 uses theDD-AA model to illustrate this point. The figure shows the effect on the economy of a rise in real domestic money demand (that is, a rise in the real balances people desire to hold at each level of the interest rate and income) under a floating exchange rate. Because a lower level of income is now needed (given E) for people to be content to hold the available real money supply, A A1 shifts leftward to AA2: Income falls from Y] to Y2 as thecurrency appreciates from E1 to E2. The rise in money demand works exactly like a fall in the money supply, and if it is permanent it will lead eventually to a fall in the home price level.Under a fixed exchange rate, however, the change in money demand does not affect the economy at all. To prevent the home currency from appreciating, the central bank buys foreign reserves with domestic money until the real money supply rises by an amount equal to the rise in real money demand. This intervention has the effect of keeping AA[ in its original position, preventing any change in output or the price level.A fixed exchange rate therefore automatically prevents instability in the domestic money market from affecting the economy. This is a powerful argument in favor of fixed rates if most of the shocks that buffet the economy come from the home money market (that is, if they result from shifts in AA). But as we saw in the previous section, fixing the exchange rate will worsen macroeconomic performance on average if output market shocks (that is, shocks involving shifts in DD) predominate.Injury to International Trade and InvestmentCritics of floating also charged that the inherent variability of floating exchange rates would injure international trade and investment. Fluctuating currencies make importers more uncertain about the prices they will have to pay for goods in the future and make exporters more uncertain about the prices they will receive. This uncertainty, it was claimed, would make it costlier to engage in international trade, and as a result trade volumes—and with them the gains countries realize through trade—would shrink. Similarly, greater uncertainty about the payoffs on investments might interfere with productive international capital flows.Supporters of floating countered that international traders could avoid exchange rate risk through transactions in the forward exchange market (see Chapter 13), which would grow in scope and efficiency in a floating-rate world. The skeptics replied that forward exchange markets would be expensive to use and that it was doubtful that forward transactions could be used to cover all exchange-rate risks.At a more general level, opponents of floating rates feared that the usefulness of each country's money as a guide to rational planning and calculation would be reduced. A currency becomes less useful as a unit of account if its purchasing power over imports becomes less predictable. Uncoordinated Economic PoliciesSome defenders of the Bretton Woods system thought that its rules had helped promote orderly international trade by outlawing the competitive currency depreciations that occurred during the Great Depression. With countries once again free to alter their exchange rates at will, they argued, history might repeat itself. Countries might again follow self-serving macroeconomic policies that hurt all countries and, in the end, helped none. In rebuttal, the pro-floaters replied that the Bretton Woods rules for exchange rate adjustment were cumbersome.In addition, the rules were inequitable because, in practice, it was deficit countries that came under pressure to adopt restrictive macroeconomic policies or devalue. Thefixed-rate system had "solved" the problem of international cooperation on monetary policy only by giving the United States a dominant position that it ultimately abused.The Illusion of Greater AutonomyA final line of criticism held that the policy autonomy promised by the advocates of floating rates was, in part, illusory. True, a floating rate could in theory shut out foreign inflation over the long haul and allow central banks to set their money supplies as they pleased. But, it was argued, the exchange rate is such an important macroeconomic variable that policymakers would find themselves unable to take domestic monetary policy measures without considering their effects on the exchange rate.Particularly important to this view was the role of the exchange rate in the domestic inflation process. A currency depreciation that raised import prices might induce workers to demand higher wages to maintain their customary standard of living. Higher wage settlements would then feed into final goods prices, fueling price level inflation and further wage hikes. In addition, currency depreciation would immediately raise the prices of imported goods used in the production of domestic output. Therefore, floating rates could be expected to quicken the pace at which the price level responded to increases in the money supply. While floating rates implied greater central bank control over the nominal money supply, M s, they did not necessarily imply correspondingly greater control over the policy instrument that affects employment and other real economic variables, the real money supply, M S IP. The response of domestic prices to exchange rate changes would be particularly rapid in economies where imports make up a large share of the domestic consumption basket: In such countries, currency changes have significant effects on the purchasing power of workers' wages.The skeptics also maintained that the insulating properties of a floating rate are very limited. They conceded that the exchange rate would adjust eventually to offset foreign price inflation due to excessive monetary growth. In a world of sticky prices, however, countries are nonetheless buffeted by foreign monetary developments, which affect real interest rates and real exchange rates in the short run. Further, there is no reason, even in theory, why one country's fiscal policies cannot have repercussions abroad.Critics of floating thus argued that its potential benefits had been oversold relative toits costs. Macroeconomic policymakers would continue to labor under the constraint of avoiding excessive exchange rate fluctuations. But by abandoning fixed rates, they would have forgone the benefits for world trade and investment of predictable currency values. CASE STUDYExchange Rate Experience Between the Oil Shocks, 1973-1980 Which group was right, the advocates of floating rates or the critics? In this Case Study and the next we survey the experience with floating exchange rates since 1973 in an attempt to answer this question. To avoid future disappointment, however, it is best to state up front that, as is often the case in economics, the data do not lead to a clear verdict. Although a number of predictions made by the critics of floating were borne out by subsequent events, it is also unclear whether a regime of fixed exchange rates would have survived the series of economic storms that has shaken the world economy since 1973. The First Oil Shock and Its Effects, I973-I975As the industrialized countries' exchange rates were allowed to float in March 1973, an official group representing all IMF members was preparing plans to restore world monetary order. Formed in the fall of 1972, this group, called the Committee of Twenty, had been assigned the job of designing a new system of fixed exchange rates free of the asymmetries of Bretton Woods. By the time the committee issued its final "Outline of Reform" in July 1974, however, an upheaval in the world petroleum market had made an early return to fixed exchange rates unthinkable.Energy Prices and the 1974-1975 Recession.In October 1973 war broke out between Israel and the Arab countries. To protest support of Israel by the United States and the Netherlands, Arab members of the Organization of Petroleum Exporting Countries (OPEC), an international cartel including most large oil producers, imposed an embargo on oil shipments to those two countries. Fearing more general disruptions in oil shipments, buyers bid up market oil prices as they tried to build precautionary inventories. Encouraged by these developments in the oil market, OPEC countries began raising the price they charged to their main customers, the large oil companies. By March 1974 the oil price had quadrupled from its prewar price of $3 per barrel to $ 12 per barrel.The massive increase in the price of oil raised the energy prices paid by consumers and the operating costs of energy-using firms and also fed into the prices of nonenergy petroleum products, such as plastics. To understand the impact of these price increases, think of them as a large tax on oil importers imposed by the oil producers of OPEC. The oil shock had the same macroeconomic effect as a simultaneous increase in consumer and business taxes: Consumption and investment slowed down everywhere, and the world economy was thrown into recession. The current account balances of oil-importing countries worsened.The Acceleration of Inflation. The model we developed in Chapters 13 through 17 predicts that inflation tends to rise in booms and fall in recessions. As the world went into deep recession in 1974, however, inflation accelerated in most countries. Table 19-1 shows how inflation in the seven largest industrial countries spurted upward in that year. In a number of these countries inflation rates came close to doubling even though unemployment was rising.What happened? An important contributing factor was the oil shock itself: By directly raising the prices of petroleum products and the costs of energy-using industries, the increase in the oil price caused price levels to jump upward. Further, the worldwide inflationary pressures that had built up since the end of the 1960s had become entrenched in the wage-setting process and were continuing to contribute to inflation in spite of the deteriorating employment picture. The same inflationary expectations that were driving new wage contracts were also putting additional upward pressure on commodity prices as speculators built up stocks of commodities whose prices they expected to rise.Finally, the oil crisis, as luck would have it, was not the only supply shock troubling the world economy at the time. From 1972 on, a coincidence of adverse supply disturbances pushed farm prices upward and thus contributed to the general inflation.。
《国际经济学》教师手册及课后习题答案(克鲁格曼,第六版)imch13
HAPTER 13EXCHANGE RATES AND THE FOREIGN EXCHANGE MARKET: AN ASSET APPROACHChapter OrganizationExchange Rates and International TransactionsDomestic and Foreign PricesExchange Rates and Relative PricesBox: A Tale of Two DollarsThe Foreign Exchange MarketThe ActorsCharacteristics of the MarketSpot Rates and Forward RatesForeign Exchange SwapsFutures and OptionsThe Demand for Foreign Currency AssetsAssets and Asset ReturnsRisk and LiquidityInterest RatesExchange Rates and Asset ReturnsA Simple RuleReturn, Risk, and Liquidity in the Foreign Exchange MarketEquilibrium in the Foreign Exchange MarketInterest Parity: The Basic Equilibrium ConditionHow Changes in the Current Exchange Rate Affect Expected ReturnsThe Equilibrium Exchange RateInterest Rates, Expectations, and EquilibriumThe Effect of Changing Interest Rates on the Current Exchange RateThe Effect of Changing Expectations on the Current Exchange RateBox: The Perils of Forecasting Exchange RatesSummaryAppendix: Forward Exchange Rates and Covered Interest ParityCHAPTER OVERVIEWThe purpose of this chapter is to show the importance of the exchange rate in translating foreign prices into domestic values as well as to begin the presentation of exchange-rate determination. Central to the treatment of exchange-rate determination is the insight that exchange rates are determined in the same way as other asset prices. The chapter begins by describing how the relative prices of different countries' goods are affected by exchange rate changes. This discussion illustrates the central importance of exchange rates for cross-border economic linkages. The determination of the level of the exchange rate is modeled in the context of the exchange rate's role as the relative price of foreign and domestic currencies, using the uncovered interest parity relationship.The euro is used often in examples. Some students may not be familiar with the currency or aware of which countries use it; a brief discussion may be warranted. A full treatment of EMU and the theories surrounding currency unification appears in Chapter 20.The description of the foreign-exchange market stresses the involvement of large organizations (commercial banks, corporations, nonbank financial institutions, and central banks) and the highly integrated nature of the market. The nature of the foreign-exchange market ensures that arbitrage occurs quickly, so that common rates are offered worldwide. Forward foreign-exchange trading, foreign-exchange futures contracts and foreign-exchange options play an important part in currency market activity. The use of these financial instruments to eliminate short-run exchange-rate risk is described.The explanation of exchange-rate determination in this chapter emphasizes the modern view that exchange rates move to equilibrate asset markets. The foreign-exchange demand and supply curves that introduce exchange-rate determination in most undergraduate texts are not found here. Instead, there is a discussion of asset pricing and the determination of expected rates of return on assets denominated in different currencies.Students may already be familiar with the distinction between real and nominal returns. The text demonstrates that nominal returns are sufficient for comparing the attractiveness of different assets. There is a brief description of the role played by risk and liquidity in asset demand, but these considerations are not pursued in this chapter. (The role of risk is taken up again in Chapter 17.)Substantial space is devoted to the topic of comparing expected returns on assets denominated in domestic and foreign currency. The text identifies two parts of the expected return on a foreign-currency asset (measured in domestic-currency terms): the interest payment and the change in the value of the foreign currency relative to the domestic currency over the period in which the asset is held. The expected return on a foreign asset is calculated as a function of the current exchange rate for given expected values of the future exchange rate and the foreign interest rate.The absence of risk and liquidity considerations implies that the expected returns on all assets traded in the foreign-exchange market must be equal. It is thus a short step from calculations of expected returns on foreign assets to the interest parity condition. The foreign-exchange market is shown to be in equilibrium only when the interest parity condition holds. Thus, for given interest rates and given expectations about future exchange rates, interest parity determines the current equilibrium exchange rate. The interest parity diagram introduced here is instrumental in later chapters in which a more general model is presented. Since a command of this interest parity diagram is an important building block for future work, we recommend drills that employ this diagram.The result that a dollar appreciation makes foreign currency assets more attractive may appear counterintuitive to students -- why does a stronger dollar reduce the expected return on dollar assets? The key to explaining this point is that, under the static expectations and constant interest rates assumptions, a dollar appreciation today implies a greater future dollar depreciation; so, an American investor can expect to gain not only the foreign interest payment but also the extra return due to the dollar's additional future depreciation. The following diagram illustrates this point. In this diagram, the exchange rate at time t+1 is expected to be equal to E. If the exchange rate at time t is also E then expected depreciation is 0. If, however, the exchange rate depreciates at time t to E' then it must appreciate to reach E at time t+1. If the exchange rate appreciates today to E" then it must depreciate to reach E at time t+1. Thus, under static expectations, a depreciation today implies an expected appreciation and conversely.D om estic C urrencyF oreign C urrency E 'EE "Figure 13-1This pedagogic tool can be employed to provide some further intuition behind the interest parity relationship. Suppose that the domestic and foreign interest rates are equal. Interest parity then requires that expected depreciation is equal to zero and that the exchange rate today and next period is equal to E. If the domestic interest rate rises, people will want to hold more domestic-currency deposits. The resulting increased demand for domestic currency drives up the price of domestic currency, causing the exchange rate to appreciate. How long will this continue? The answer is that the appreciation of the domestic currency continues until the expected depreciation that is a consequence of the domestic currency's appreciation today just offsets the interest differential.The text presents exercises on the effects of changes in interest rates and of changes in expectations of the future exchange rate. These exercises can help develop students' intuition. For example, the initial result of a rise in U.S. interest rates is a higher demand for dollar-denominated assets and thus an increase in the price of the dollar. This dollar appreciation is large enough that the subsequent expected dollar depreciation just equalizes the expected return on foreign-currency assets (measured in dollar terms) and the higher dollar interest rate.The appendix describes the covered interest parity relationship and applies it to explain the determination of forward rates under risk neutrality as well as the high correlation between movements in spot and forward rates.ANSWERS TO TEXTBOOK PROBLEMS1. At an exchange rate of $1.50 per euro, the price of a bratwurst in terms of hot dogs is 3hot dogs per bratwurst. After a dollar appreciation to $1.25 per euro, the relative price of a bratwurst falls to 2.5 hot dogs per bratwurst.2. The Norwegian krone/Swiss franc cross rate must be 6 Norwegian krone per Swissfranc.3. The dollar rates of return are as follows:a. ($250,000 - $200,000)/$200,000 = 0.25.b. ($216 - $180)/$180 = 0.20.c. There are two parts of this return. One is the loss involved due to the appreciation ofthe dollar; the dollar appreciation is ($1.38 - $1.50)/$1.50 = -0.08. The other part of the return is the interest paid by the London bank on the deposit, 10 percent. (The size of the deposit is immaterial to the calculation of the rate of return.) In terms of dollars, the realized return on the London deposit is thus 2 percent per year.4. Note here that the ordering of the returns of the three assets is the same whether wecalculate real or nominal returns.a. The real return on the house would be 25% - 10% = 15%. This return could also becalculated by first finding the portion of the $50,000 nominal increase in the house's price due to inflation ($20,000), then finding the portion of the nominal increase due to real appreciation ($30,000), and finally finding the appropriate real rate of return ($30,000/$200,000 = 0.15).b. Again, subtracting the inflation rate from the nominal return we get 20%- 10% = 10%.c. 2% - 10% = -8%.5. The current equilibrium exchange rate must equal its expected future level since, withequality of nominal interest rates, there can be no expected increase or decrease in the dollar/pound exchange rate in equilibrium. If the expected exchange rate remains at $1.52 per pound and the pound interest rate rises to 10 percent, then interest parity is satisfied only if the current exchange rate changes such that there is an expected appreciation of the dollar equal to 5 percent. This will occur when the exchange rate rises to $1.60 per pound (a depreciation of the dollar against the pound).6. If market traders learn that the dollar interest rate will soon fall, they also reviseupward their expectation of the dollar's future depreciation in the foreign-exchange market. Given the current exchange rate and interest rates, there is thus a rise in the expected dollar return on euro deposits. The downward-sloping curve in the diagram below shifts to the right and there is an immediate dollar depreciation, as shown in the figure below where a shift in the interest-parity curve from II to I'I' leads to a depreciation of the dollar from E 0 to E 1.E($/euro i E 0 E 1Figure 13-2 7. The analysis will be parallel to that in the text. As shown in the accompanyingdiagrams, a movement down the vertical axis in the new graph, however, is interpreted as a euro appreciation and dollar depreciation rather than the reverse. Also, the horizontal axis now measures the euro interest rate. Figure 13-3 demonstrates that, given the expected future exchange rate, a rise in the euro interest rate from R 0 to R 1 will lead to a euro appreciation from E 0 to E 1.Figure 13-4 shows that, given the euro interest rate of i, the expectation of a stronger euro in the future leads to a leftward shift of the downward-sloping curve from II to I'I' and a euro appreciation (dollar depreciation) from E to E'. A rise in the dollar interest rate causes the same curve to shift rightward, so the euro depreciates against the dollar. This simply reverses the movement in figure 13-4, with a shift from I'I' to II, and a depreciation of the euro from E' to E. All of these results are the same as in the text when using the diagram for the dollar rather than the euro.EE 0rates o f return (in euro s) (euroE 101Figure 13-3Ei E (euro/$)E ’Figure 13-48. a. If the Federal Reserve pushed interest rates down, with an unchanged expected futureexchange rate, the dollar would depreciate (note that the article uses the term "downward pressure" to mean pressure for the dollar to depreciate). In terms of the analysis developed in this chapter, a move by the Federal Reserve to lower interest rates would be reflected in a movement from R to R' in figure 13.5, and a depreciation of the exchange rate from E to E'.If there is a "soft landing", and the Federal Reserve does not lower interest rates, thenthis dollar depreciation will not occur. Even if the Federal Reserve does lower interest rates a little, say from R to R", this may be a smaller decrease then what peopleinitially believed would occur. In this case, the expected future value of the exchange rate will be more appreciated than before, causing the interest-parity curve to shift in from II to I'I' (as shown in figure 13.6). The shift in the curve reflects the "optimism sparked by the expectation of a soft landing" and this change in expectations means that, with a fall in interest rates from R to R", the exchange rate depreciates from E to E", rather than from E to E *, which would occur in the absence of a change in expectations.ER ’ EE*Rrates of return (in dollars)EE Rrates of return (in dollars) E ”E *R ”Figure 13-6b.The "disruptive" effects of a recession make dollar holdings more risky. Risky assetsmust offer some extra compensation such that people willingly hold them as opposed to other, less risky assets. This extra compensation may be in the form of a bigger expected appreciation of the currency in which the asset is held. Given the expected future value of the exchange rate, a bigger expected appreciation is obtained by a more depreciated exchange rate today. Thus, a recession that is disruptive and makes dollar assets more risky will cause a depreciation of the dollar.9. The euro is less risky for you. When the rest of your wealth falls, the euro tends toappreciate, cushioning your losses by giving you a relatively high payoff in terms of dollars. Losses on your euro assets, on the other hand, tend to occur when they are least painful, that is, when the rest of your wealth is unexpectedly high. Holding the euro therefore reduces the variability of your total wealth.10. The chapter states that most foreign-exchange transactions between banks (whichaccounts for the vast majority of foreign-exchange transactions) involve exchanges of foreign currencies for U.S. dollars, even when the ultimate transaction involves the sale of one nondollar currency for another nondollar currency. This central role of the dollar makes it a vehicle currency in international transactions. The reason the dollar serves as a vehicle currency is that it is the most liquid of currencies since it is easy to find people willing to trade foreign currencies for dollars. The greater liquidity of the dollar as compared to, say, the Mexican peso, means that people are more willing to hold the dollar than the peso, and thus, dollar deposits can offer a lower interest rate, for any expected rate of depreciation against a third currency, than peso deposits for the same rate of depreciation against that third currency. As the world capital market becomes increasingly integrated, the liquidity advantages of holding dollar deposits as opposed to yen deposits will probably diminish. The euro represents an economy as large as the United States, so it is possible that it will assume some of that vehicle role of the dollar, reducing the liquidity advantages to as far as zero. Since the euro has no history as a currency, though, some investors may be leary of holding it until it has established a track record. Thus, the advantage may fade slowly.11. Greater fluctuations in the dollar interest rate lead directly to greater fluctuations in theexchange rate using the model described here. The movements in the interest rate can be investigated by shifting the vertical interest rate curve. As shown in figure 13.7,these movements lead directly to movements in the exchange rate. For example, an increase in the interest rate from i to i' leads to a dollar appreciation from E to E'. A decrease in the interest rate from i to i" leads to a dollar depreciation from E to E". This diagram demonstrates the direct link between interest rate volatility and exchange rate volatility, given that the expected future exchange rate does not change.EE($/foreign currency)rates of return (in dollars)iE ’i"i'E ”Figure 13-712. A tax on interest earnings and capital gains leaves the interest parity condition thesame, since all its components are multiplied by one less the tax rate to obtain after-tax returns. If capital gains are untaxed, the expected depreciation term in the interest parity condition must be divided by 1 less the tax rate. The component of the foreign return due to capital gains is now valued more highly than interest payments because it is untaxed.13. The forward premium can be calculated as described in the appendix. In this case, wefind the forward premium on euro to be (1.26 – 1.20)/1.20 = 0.05. The interest-rate difference between one-year dollar deposits and one-year euro deposits will be 5 percent because the interest difference must equal the forward premium on euro against dollars when covered interest parity holds.FURTHER READINGSJ. Orlin Grabbe. International Financial Markets, 3rd Edition. Englewood Cliffs: Prentice-Hall, 1996.Philipp Hartmann. Currency Competition and Foreign Exchange Rate Markets: The Dollar, the Yen, and the Euro. Cambridge: Cambridge University Press, 1999.John Maynard Keynes. A Tract on Monetary Reform. Chapter 3. London: Macmillan, 1923.Paul R. Krugman. "The International Role of the Dollar: Theory and Prospect." in John F.O. Bilson and Richard C. Marston, eds. Exchange Rate Theory and Practice. Chicago: University of Chicago Press, 1984, pp. 261-278.Richard Levich. International Financial Markets: Prices and Policies. Boston: Irwin McGraw-Hill, 1998.Richard K. Lyons. The Microstructure Approach to Exchange Rates. Cambridge: MIT Press, 2001.Ronald I. McKinnon. Money in International Exchange: The Convertible Currency System. New York: Oxford University Press, 1979.Michael Mussa. "Empirical Regularities in the Behavior of Exchange-rates and Theories of the Foreign-Exchange Market." in Karl Brunner and Allan H. Meltzer eds., Policies for Employment Prices and Exchange-Rates. Carnegie-Rochester Conference Series on Public Policy 11. Amsterdam: North-Holland Press, 1979.Julian Walmsley. The Foreign Exchange and Money Markets Guide. New York: John Wiley & Sons, 1992.99。
国际经济学克鲁格曼版[]PPT课件
![国际经济学克鲁格曼版[]PPT课件](https://img.taocdn.com/s3/m/90382b676c175f0e7dd1372e.png)
的需求量总和之比。
• 当奶酪的相对价格上升时，各国的消费者将会减少奶 酪的购买量，增加葡萄酒的购买量，因此奶酪的相对 需求就减少了。
可编辑
3-30
Hale Waihona Puke 相对供给和相对需求奶酪的相对价格， PC/PW
a*LC/a*LW aLC/aLW
可编辑
3-9
比较优势和贸易
万支玫瑰 万台计算机
美国
-1000
+10
厄瓜多尔
+1000
-3
总计
0
+7
可编辑
3-10
比较优势和贸易
• 在这个简单的例子中，我们可以看出当每个国 家专注于生产他们有比较优势的产品时，两个 国家就可以生产和消费更多的商品和服务。
可编辑
3-11
单一要素的李嘉图模型
• 玫瑰和计算机的简单案例解释了李嘉图模型的 内涵。
• 若相对需求曲线是RD’，则表示奶酪的相对价格等于 本国奶酪的机会成本。此时，本国不一定需要从事任 何一种产品的专业化生产。外国仍然专业生产葡萄酒。
• 一般来说，是第一种情况居多。各国都只生产自己具 有比较优势的产品。再进行贸易，使得消费扩张。
可编辑
3-33
贸易所得
• 行业间相对劳动生产率不同的国家会在不同的产品生 产中进行专业化分工，而每个国家的贸易所得正是通 过这种专业化分工而获得的。此外，国家可以用贸易 所得来购买所需的商品和服务。
RS 1
RD
L/aLC L*/a*LW
奶酪的相对产量，
QC + Q*C QW + Q*W
国际经济学课件中文版克鲁格曼教材
18
比较优势的概念
表 2-1的例子说明了比较优势的原则:
• 如果每一个国家出口 他具有 比较优势（低机会成本）
的产品 ，那么所有国家都能从以这种原则进行的贸易 中获益。
什么决定 比较优势?
• 回答这个问题将会帮助我们理解国家之间的 不同是如
何决定贸易结构（一个国家出口哪种商品）的。
– 国际贸易也许会损害国内某些人的利益 – 贸易, 技术, 以及高工资和低劳动技能的工人.
• 国际贸易关于什么的学科?
– 贸易结构 (谁卖给谁什么?) – 气候以及资源决定了一些产品的贸易结构 – 在工业和服务业在贸易结构上差异更加微妙. -不同国家劳动生产率是不同的. -一方面是国家资源如资本，劳动，土地的相关供给另一方面是在不同商 品的生产上对于这些劳动要素的运用. -一个大体上随机的组成部分. – 贸易的两种方式: » 产业内贸易 取决于国家之间的不同. » 产业间贸易 取决于市场的规模并且发生在相似国家之间
• 国际市场允 许政府对不同公司实行区别对待的政策，
这是可以分析的.
• 政府也控制货币供应.
在国际经济学的学习期间还会学到其他一些经常发
生的经济问题.
Copyright © 2003 Pearson Education, Inc.
Slide 1-3
国际经济学是关于什么的学科？
贸易利益
• 很对人对于一国进口其自己可以生产的物品持怀疑的态度. • 当国家卖给其他国家货物和服务时，所有国家都受益. • 贸易与受益分配
27
单一要素世界的贸易
绝对优势
• 如果一个国家在某种商品上生产较外国需要更少的
单位劳动力，那么这个国家就在这种商品的生产上 具有绝对的比较优势.
《国际经济学》克鲁格曼(第六版)习题答案imsect4
OVERVIEW OF SECTION IV: INTERNATIONAL MACROECONOMIC POLICYPart IV of the text is comprised of five chapters:Chapter 18 The International Monetary System, 1870-1973Chapter 19 Macroeconomic Policy and Coordination Under Floating Exchange Rates Chapter 20 Optimum Currency Areas and The European ExperienceChapter 21 The Global Capital Market: Performance and Policy ProblemsChapter 22 Developing Countries: Growth, Crisis, and ReformSECTION OVERVIEWThis final section of the book, which discusses international macroeconomic policy, provides historical and institutional background to complement the theoretical presentation of the previous section. These chapters also provide an opportunity for students to hone their analytic skills and intuition by applying and extending the models learned in Part III to a range of current and historical issues.The first two chapters of this section discuss various international monetary arrangements. These chapters describe the workings of different exchange rate systems through the central theme of internal and external balance. The model developed in the previous section provides a general framework for analysis of gold standard, reserve currency, managed floating, and floating exchange-rate systems.Chapter 18 chronicles the evolution of the international monetary system from the gold standard of 1870 - 1914, through the interwar years, and up to and including the post-war Bretton Woods period. The chapter discusses the price-specie-flow mechanism of adjustment in the context of the discussion of the gold standard. Conditions for internal and external balance are presented through diagrammatic analysis based upon the short-run macroeconomic model of Chapter 16. This analysis illustrates the strengths and weaknesses of alternative fixed exchange rate arrangements. The chapter also draws upon earlier discussion of balance of payments crises to make clear the interplay between "fundamental disequilibrium" and speculative attacks. There is a detailed analysis of the Bretton Woodssystem that includes a case study of the experience during its decline beginning in the mid-1960s and culminating with its collapse in 1973.Chapter 19 focuses on recent experience under floating exchange rates. The discussion is couched in terms of current debate concerning the advantages of floating versus fixed exchange rate systems. The theoretical arguments for and against floating exchange rates frame two case studies, the first on the experience between the two oil shocks in the 1970s and the second on the experience since 1980. The transmission of monetary and fiscal shocks from one country to another is also considered. Discussion of the experience in the 1980s points out the shift in policy toward greater coordination in the second half of the decade. Discussion of the 1990s focuses on the strong U.S. economy from 1992 on and the extended economic difficulties in Japan. Finally, the chapter considers what has been learned about floating rates since 1973. The appendix illustrates losses arising from uncoordinated international monetary policy using a game theory setup.Europe’s switch to a single currency, the euro, is the subject of Chapter 20, and provides a particular example of a single currency system. The chapter discusses the history of the European Monetary System and its precursors. The early years of the E.M.S. were marked by capital controls and frequent realignments. By the end of the 1980s, however, there was marked inflation convergence among E.M.S. members, few realignments and the removal of capital controls. Despite a speculative crisis in 1992-3, leaders pressed on with plans for the establishment of a single European currency as outlined in the Maastricht Treaty which created Economic and Monetary Union (EMU). The single currency was viewed as an important part of the EC 1992 initiative which called for the free flow within Europe of labor, capital, goods and services. The single currency, the euro, was launched on January 1, 1999 with eleven original participants. These countries have ceded monetary authority to a supranational central bank and constrained their fiscal policy with agreements on convergence criteria and the stability and growth pact. A single currency imposes costs as well as confers benefits. The theory of optimum currency areas suggests conditions which affect the relative benefits of a single currency. The chapter provides a way to frame this analysis using the GG-LL diagram which compares the gains and losses from a single currency. Finally, the chapter examines the prospects of the EU as an optimal currency area compared to the United States and considers the future challenges EMU will face.The international capital market is the subject of Chapter 21. This chapter draws an analogy between the gains from trade arising from international portfolio diversification andinternational goods trade. There is discussion of institutional structures that have arisen to exploit these gains. The chapter discusses the Eurocurrency market, the regulation of offshore banking, and the role of international financial supervisory cooperation. The chapter examines policy issues of financial markets, the policy trilemma of the incompatibility of fixed rates, independent monetary policy, and capital mobility as well as the tension between supporting financial stability and creating a moral hazard when a government intervenes in financial markets. The chapter also considers evidence of how well the international capital market has performed by focusing on issues such as the efficiency of the foreign exchange market and the existence of excess volatility of exchange rates.Chapter 22 discusses issues facing developing countries. The chapter begins by identifying characteristics of the economies of developing countries, characteristics that include undeveloped financial markets, pervasive government involvement, and a dependence on commodity exports. The macroeconomic analysis of previous chapters again provides a framework for analyzing relevant issues, such as inflation in or capital flows to developing countries. Borrowing by developing countries is discussed as an attempt to exploit gains from intertemporal trade and is put in historical perspective. Latin American countries’ problems with inflation and subsequent attempts at reform are detailed. Finally, the East Asian economic miracle is revisited (it is discussed in Chapter 10), and the East Asian financial crisis is examined. This final topic provides an opportunity to discuss possible reforms of the world’s financial architecture.。
复旦大学【克鲁格曼《国际经济学》第六版英文课件】CH12
– It is the sum of domestic and foreign expenditure on the goods and services produced by domestic factors of production:
Y = C + I + G + EX – IM
(12-1)
4
The National Income Accounts
Gross national product (GNP)
– The value of all final goods and services produced by a country’s factors of production and sold on the market in a given time period
The price of milk is 0.5 bushel of wheat per gallon, and at this price Agrarians want to consume 40 gallons of milk.
13
National Income Accounting for an Open Economy
– Adjustments to the definition of GNP:
»Depreciation of capital
It reduces the income of capsubtracted from GNP (to get the net national product).
»CA balance is goods production less domestic demand. »CA balance is the excess supply of domestic financing.
国际经济学 克鲁格曼版
世界贸易概览
Slides prepared by Thomas Bishop
Copyright © 2009 Pearson Addison-Wesley. All rights reserved.
本章探讨的两个问题
• 谁和谁贸易的问题（引力模型不仅能解释两国 间贸易量的大小，而且能说明当今制约国际贸 易发展的障碍因素）
2-20
世界变小了吗？
• 两个经济全球化浪潮
1840—1914 经济依赖于蒸汽机、铁路、电 报机、电话 。经济全球化因为战争和经济大 萧条被阻止和取消。 1945至今: 经济依赖于电话、飞机、计算机、 因特网、光学纤维、掌上电脑、GPS卫星定 位等等。
Copyright © 2009 Pearson Addison-Wesley. All rights reserved.
轮船、帆船、指南针、铁路、电报、蒸汽机、动力 机、汽车、电话、飞机、计算机、机械装置、因特 网、光纤化学、个人数码助理,、GPS卫星定位等等 现代化技术增加了国际贸易量。
• 但是历史表明政治因素，例如战争，对贸易形 式的影响要比交通和通讯的改革更为强烈。
Copyright © 2009 Pearson Addison-Wesley. All rights reserved.
Copyright © 2009 Pearson Addison-Wesley. All rights reserved.
2-15
距离、壁垒和疆界
• 1994年美国和加拿大、墨西哥签署了贸 易协定，即《北美自由贸易协定》。
• 由于加拿大和墨西哥不仅是美国的邻居， 而且与它签署了贸易协定，因此美国的 邻国与美国个贸易量远胜过美国的欧洲 贸易伙伴与美国的贸易量。
国际经济学课件ch19
19-3
Arguments for Flexible Exchange Rates
1. Monetary policy autonomy
♦ Without a need to trade currency in foreign exchange markets, central banks are more free to influence the domestic money supply, interest rates, and inflation. ♦ Central banks can more freely react to changes in aggregate demand, output, and prices in order to achieve internal balance.
Copyright © 2009 Pearson Addison-Wesley. All rights reserved.
19-10
Arguments Against Flexible Exchange Rates
1. Uncoordinated macroeconomic policies
♦ Flexible exchange rates lose the coordination of monetary polices through fixed exchange rates. a) Lack of coordination may cause “expenditure switching” policies: each country may want to maintain a low-valued currency, so that aggregate demand is switched to domestic products at the expense of other economies
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Copyright © 2003 Pearson Education, Inc.
Slide 19-10
“fundamental disequilibriums” that had led to parity changes and speculative attacks under fixed rates.
– Figure 19-1 shows that a temporary fall in a country’s export demand reduces that country’s output more under a fixed rate than a floating rate.
Copyright © 2003 Pearson Education, Inc.
Slide 19-6
The Case for Floating Exchange Rates
▪ Exchange Rates as Automatic Stabilizers
• Floating exchange rates quickly eliminate the
disappointing?
▪ What direction should reform of the current system
take?
▪ This chapter compares the macroeconomic policy
problems of different exchange rate regimes.
Y2 Y1
产出, Y
DD2 DD1
3 1
Copyright © 2003 Pearson Education, Inc.
AA1 AA2
Y3 Y2 Y1
产出, Y
Slide 19-8
The Case Against Floating Exchange Rates
▪ There are five arguments against floating rates:
The Case Against Floating Exchange Rates
▪ Destabilizing Speculation and Money Market
Disturbances
• Floating exchange rates allow destabilizing
speculation.
central banks.
– Central banks might embark on inflationary policies (e.g., the German hyperinflation of the 1920s).
• The pro-floaters’ response was that a floating exchange
of the Bretton Woods system and allow:
– Central banks abroad to be able to determine their own domestic money supplies
– The U.S. to have the same opportunity as other countries to influence its exchange rate against foreign currencies
Copyright © 2003 Pearson Education, Inc.
Slide 19-7
The Case for Floating Exchange Rates
(a) 浮动汇率
Figure 19-1: 出口商品需求下降的影响
汇率, E
DD2
2
DD1
E2
1
E1
AA1
汇率, E
(b) 固定汇率 E1
in competitive currency depreciations.
– Countries might adopt policies without considering their possible beggar-thy-neighbor aspects.
Copyright © 2003 Pearson Education, Inc.
▪ The floating exchange rate system, in place since
1973, was not well planned before its inception.
▪ By the mid-1980s, economists and policymakers had
• Supporters of floating exchange rates argue that
forward markets can be used to protect traders against foreign exchange risk.
– The skeptics replied to this argument by pointing out that forward exchange markets would be expensive.
Copyright © 2003 Pearson Education, Inc.
Slide 19-13
The Case Against Floating Exchange Rates
▪ Uncoordinated Economic Policies
• Floating exchange rates leave countries free to engage
• Floating exchange rates make a country more
vulnerable to money market disturbances.
– Figure 19-2 illustrates this point.
Copyright © 2003 Pearson Education, Inc.
Countries?
▪ Directions for Reform ▪ Summary ▪ Appendix: International Policy Coordination Failures
Copyright © 2003 Pearson Education, Inc.
Slide 19-2
Introduction
inflation rate
Copyright © 2003 Pearson Education, Inc.
Slide 19-5
The Case for Floating Exchange Rates
▪ Symmetry
• Floating exchange rates remove two main asymmetries
because they make relative international prices more unpredictable:
– Exporters and importers face greater exchange risk.
– International investments face greater uncertainty about their payoffs.
Copyright © 2003 Pearson Education, Inc.
Slide 19-9
The Case Against Floating Exchange Rates
▪ Discipline
• Floating exchange rates do not provide discipline for
become more skeptical about the benefits of an
international monetary system based on floating rates.
▪ Why has the performance of floating rates been so
• Monetary policy autonomy • Symmetry • Exchange rates as automatic stabilizers
Copyright © 2003 Pearson Education, Inc.
Slide 19-4
The Case for Floating Exchange Rates
Slide 19-14
The Case Against Floating Exchange Rates
▪ The Illusion of Greater Autonomy
• Floating exchange rates increase the uncertainty in the
economy without really giving macroeconomic policy greater freedom.
– Countries can be caught in a “vicious circle” of depreciation and inflation.
• Advocates of floating rates point out that destabilizing
speculators ultimately lose money.
• Discipline • Destabilizing speculation and money market
disturbances