《国际货币与金融经济学》ppt08

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Elasticity of Export Supply and the Elasticity of Foreign Exchange Supply
In the left-hand panel, the export supply curve S′CD is more elastic than the supply curve SCD. In the right-hand panel, the foreign exchange supply curve S′€ is more elastic than the foreign exchange supply curve S€.
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The Role of Elasticity
• The previous chart illustrated a current account deficit for the United States. • The amount of depreciation required to eliminate this deficit depends on elasticity. • When demand and supply are relatively more elastic, a smaller deprecation is required to eliminate the current account deficit.
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Elasticity of Import Demand and the Elasticity of Foreign Exchange Demand
In the left-hand panel, the import demand curve denoted D′C is more elastic that the demand curve DC. In the right-hand panel, the foreign exchange demand curve denoted D′€ is more elastic than the foreign exchange demand curve D€.
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The Current Account
The current account deficit is equivalent to the difference between the quantity of foreign exchange demanded and the quantity of foreign exchange supplied. At the spot exchange rate of 1.00, U.S. residents demand €220 million in foreign exchange and European residents supply €180 million. Hence, the current account deficit is €40 million.
Joseph P. Daniels David D. VanHoose
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Overview of the Elasticities Approach
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Traditional Approaches
• Traditional approaches to balance-of-payments and exchange-rate determination assume that capital flows occur only to finance real-sector transactions. • Hence, the quantity of foreign exchange demanded and the quantity of foreign exchange supplied depend only on international transactions of goods and services.
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The Demand for and Supply of Foreign Exchange
• The demand for a nation’s currency is dependent upon foreign residents’ demand for its exports, that is, it depends on foreign residents’ desire to obtain the domestic currency to facilitate their purchases of the domestic country’s exports. • The supply of a nation’s currency is dependent upon (among other things) domestic residents’ demand for imports, that is, when a nation’s residents import, they supply the domestic currency as payment.
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The Export Supply Curve and the Supply of the Euro
The left-hand panel illustrates an export supply curve for the United States as combinations of the quantities of music CDs supplied at various prices. The right-hand panel shows the corresponding supply of foreign exchange as combinations of the quantities of foreign exchange supplied at various exchange rates.
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The Marshall-Lerner Condition
• Will a depreciation always improve the current account balance? • The Marshall-Lerner condition specifies the necessary conditions for the current account to improve. • According to this condition, the current account balance will improve if the sum of the elasticity of import demand and the elasticity of export supply exceed unity.
• The elasticities approach emphasizes price changes as a determinant of a nation’s balance of payments and exchange rate. • The elasticities approach is helpful in understanding the different outcomes that might arise from the shor Elasticity
• Price Elasticity of Demand is a measure of the responsiveness of quantity demanded to a change in price. • If quantity demanded is highly responsive to a change in price, then demand is said to be relatively elastic. • If quantity demanded is not very responsive to a change in price, then demand is said to be relatively inelastic.
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The Responsiveness of Imports and Exports
• The elasticities approach, therefore, considers the responsiveness of the quantity of imports and the quantity of exports to a change in the value of a nation’s currency. • For example, if import demand is highly elastic, a depreciation of the domestic currency will cause a relatively larger decline in the nation’s imports.
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The Effect of Exchange Rate Changes
• The exchange rate is an important price to an economy. • When a nation’s currency depreciates, domestic goods become relatively cheaper and foreign goods relatively more expensive in the global market. • Hence, we would expect the nation’s exports to rise and imports to decline.