《巴罗宏观经济学：现代观点第11章.ppt》由会员分享，可在线阅读，更多相关《巴罗宏观经济学：现代观点第11章.ppt（65页珍藏版）》请在三一办公上搜索。
1、Macroeconomics Chapter 11,1,Inflation,Money Growth,and Interest Rates,C h a p t e r 1 1,Macroeconomics Chapter 11,2,Cross-Country Data on Inflation and Money Growth,Key equation:Ms=P L(Y,i)Two possible reasons of inflation:Decrease of real demand for moneyIncrease of money supply,Macroeconomics Chap
2、ter 11,3,Cross-Country Data on Inflation and Money Growth,Inflation rates and money growth rates for 82 countries from 1960 to 2000.We measure the price level,P,by the consumer price index(CPI).We use the CPI,rather than the GDP deflator,because of data availability.,Macroeconomics Chapter 11,4,Macr
3、oeconomics Chapter 11,5,Macroeconomics Chapter 11,6,Macroeconomics Chapter 11,7,Cross-Country Data on Inflation and Money Growth,HighlightsThe inflation rate was greater than 0 for all countries from 1960 to 2000The growth rate of nominal currency was greater than 0 for all countries from 1960 to 20
4、00.There is a broad cross-sectional range for the inflation rates and the growth rates of money.,Macroeconomics Chapter 11,8,Cross-Country Data on Inflation and Money Growth,HighlightsThe median inflation rate from 1960 to 2000 was 8.3%per year,with 30 countries exceeding 10%.For the growth rate of
5、nominal currency,the median was 11.6%per year,with 50 above 10%,Macroeconomics Chapter 11,9,Cross-Country Data on Inflation and Money Growth,HighlightsIn most countries,the growth rate of nominal currency,M,exceeded the growth rate of prices.For a country that has a high inflation rate in one period
6、 to have a high inflation rate in another period.Strong positive association between the inflation rate and the growth rate of nominal currency.,Macroeconomics Chapter 11,10,Cross-Country Data on Inflation and Money Growth,Macroeconomics Chapter 11,11,Cross-Country Data on Inflation and Money Growth
7、,One lesson from the cross-country data is that,to understand inflation,we have to include money growth as a central part of the analysis.Milton Friedmans famous dictum:“Inflation is always and everywhere a monetary phenomenon.”,Macroeconomics Chapter 11,12,Inflation and Interest Rates,Actual and Ex
8、pected InflationLet be the inflation rate.The inflation rate from year 1 to year 2,1,is the ratio of the change in the price level to the initial price level.1=(P2 P1)/P11=P1/P1,Macroeconomics Chapter 11,13,Inflation and Interest Rates,Actual and Expected Inflation1=(P2 P1)/P11=P1/P11 P1=P2 P1P2=(1+
9、1)P1,Macroeconomics Chapter 11,14,Inflation and Interest Rates,Actual and Expected InflationSince the future is unknown,households have to form forecasts or expectations of inflation.Denote by e1 the expectation of the inflation rate 1.The actual inflation rate,1,will usually deviate from its expect
10、ation,e1,and the forecast erroror unexpected inflationwill be nonzero.,Macroeconomics Chapter 11,15,Inflation and Interest Rates,Actual and Expected InflationHouseholds try to keep the errors as small as possible.Therefore,they use available information on past inflation and other variables to avoid
11、 systematic mistakes.Expectations formed this way are called rational expectations.,Macroeconomics Chapter 11,16,Inflation and Interest Rates,Real and Nominal Interest RatesThe dollar value of assets held as bonds rises over the year by the factor 1+i1.The interest rate i1 is the dollar or nominal i
12、nterest rate because i1 determines the change over time in the nominal value of assets held as bonds.,Macroeconomics Chapter 11,17,Inflation and Interest Rates,Macroeconomics Chapter 11,18,Inflation and Interest Rates,Real and Nominal Interest RatesThe Real interest rate to be the rate at which the
13、real value of assets held as bonds changes over time.dollar assets in year2=(dollar assets in year1)(1+i1)P2=P1(1+1),Macroeconomics Chapter 11,19,Inflation and Interest Rates,Real and Nominal Interest Rates(dollar assets in year2/P2)=(dollar assets in year1/P1)(1+i1)/(1+1)real assets in year2=(real
14、assets in year1)(1+i1)/(1+1),Macroeconomics Chapter 11,20,Inflation and Interest Rates,Real and Nominal Interest RatesSince the real interest rate,denoted by r1,is the rate at which assets held as bonds change in real value:(1+r1)=(1+i1)/(1+1),Macroeconomics Chapter 11,21,Inflation and Interest Rate
15、s,Real and Nominal Interest Ratesr1=i1 1 r11the cross term,r1 1,which tends to be small;real interest rate=nominal interest rate inflation rater1=i1 1,Macroeconomics Chapter 11,22,Inflation and Interest Rates,Fisher Equationi=r+Fisher Effect i,Macroeconomics Chapter 11,23,Inflation and Interest Rate
16、s,The Real Interest Rate and Intertemporal SubstitutionWhen the inflation rate,is not zero,it is the real interest rate,r,rather than the nominal rate,i,that matters for intertemporal substitution.,Macroeconomics Chapter 11,24,Inflation and Interest Rates,Actual and Expected Real Interest RatesThe e
17、xpected inflation rate determines the expected real interest rate,ret ret=it etexpected real interest rate=nominal interest rate expected inflation rate,Macroeconomics Chapter 11,25,Inflation and Interest Rates,Measuring expected inflationAsk a sample of people about their expectations.Use the hypot
18、hesis of rational expectations,which says that expectations correspond to optimal forecasts,given the available information.Then use statistical techniques to gauge these optimal forecasts.Use market data to infer expectations of inflation,Macroeconomics Chapter 11,26,Inflation and Interest Rates,Me
19、asuring expected inflationLivingston SurveyAsk a sample of people（50 economists）about their expectations.,Macroeconomics Chapter 11,27,Inflation and Interest Rates,Macroeconomics Chapter 11,28,Inflation and Interest Rates,Macroeconomics Chapter 11,29,Inflation and Interest Rates,Measuring expected i
20、nflationIndexed bonds,real interest rates,and expected inflation ratesIndexed government bonds,which adjust nominal payouts of interest and principal for changes in consumer-price indexes.These bonds guarantee the real interest rate over the maturity of each issue.,Macroeconomics Chapter 11,30,Infla
21、tion and Interest Rates,Macroeconomics Chapter 11,31,Inflation and Interest Rates,Macroeconomics Chapter 11,32,Inflation and Interest Rates,Interest Rates on Moneyreal interest rate on money=nominal interest rate on money treal interest rate on money=t,Macroeconomics Chapter 11,33,Inflation in the E
22、quilibrium Business-Cycle Model,GoalsTo see how inflation affects our conclusions about the determination of real variables,including real GDP,consumption and investment,quantities of labor and capital services,the real wage rate,and the real rental price.To understand the causes of inflation.,Macro
23、economics Chapter 11,34,Inflation in the Equilibrium Business-Cycle Model,Assume fully anticipated inflation,so that the inflation rate,t,equals the expected rate,et.Extend the equilibrium business-cycle model to allow for money growth.,Macroeconomics Chapter 11,35,Inflation in the Equilibrium Busin
24、ess-Cycle Model,Assume the government prints new currency and gives it to people.They receive a transfer payment from the government.The payments are lump-sum transfers,meaning that the amount received is independent of how much the household consumes and works,how much money the household holds,and
25、 so on.,Macroeconomics Chapter 11,36,Inflation in the Equilibrium Business-Cycle Model,Intertemporal-Substitution EffectsThe expected real interest rate,ret,has intertemporal-substitution effects on consumption and labor supply.Therefore,for given it,a change in t will have these intertemporal-subst
26、itution effects.,Macroeconomics Chapter 11,37,Inflation in the Equilibrium Business-Cycle Model,Bonds and Capitali=(R/P)()Replace the nominal interest rate on bonds,i,by the real rate,r,r=(R/P)(),Macroeconomics Chapter 11,38,Inflation in the Equilibrium Business-Cycle Model,Interest Rates and the De
27、mand for MoneyThe tradeoff between earning assets and holding money is(i)()=iTherefore,the nominal interest rate,i,still determines the cost of holding money rather than earning assets.We can therefore still describe real money demand by the functionMd/P=L(Y,i),Macroeconomics Chapter 11,39,Inflation
28、 in the Equilibrium Business-Cycle Model,Interest Rates and the Demand for MoneyIt is the real interest rate,r,that has intertemporal-substitution effects on consumption and labor supply.It is the nominal interest,i,that influences the real demand for money,Md/P.,Macroeconomics Chapter 11,40,Inflati
29、on in the Equilibrium Business-Cycle Model,Macroeconomics Chapter 11,41,Inflation in the Equilibrium Business-Cycle Model,Macroeconomics Chapter 11,42,Inflation in the Equilibrium Business-Cycle Model,Inflation and the Real EconomyA change in the inflation rate,does not shift the demand or supply cu
30、rve for capital services.Therefore,(R/P)*and(K)*do not change.A change in the inflation rate,does not shift the demand or supply curve for labor.Therefore,(w/P)*and L*do not change.,Macroeconomics Chapter 11,43,Inflation in the Equilibrium Business-Cycle Model,Inflation and the Real EconomyReal GDP,
31、Y,is determined by the production functionY=A F(K,L)We conclude that a change in does not influence real GDP,Y.,Macroeconomics Chapter 11,44,Inflation in the Equilibrium Business-Cycle Model,Inflation and the Real EconomyThe real rental price,R/P,and the capital utilization rate,determine the real r
32、ate of return from owning capital,(R/P)(),and therefore the real interest rate,r,r=(R/P)().Since R/P and are unchanged,we find that a change in the inflation rate,does not affect the real interest rate,r.,Macroeconomics Chapter 11,45,Inflation in the Equilibrium Business-Cycle Model,Inflation and th
33、e Real EconomyIf we continue to ignore income effects from inflation,we know that C does not change.Since Y is fixed,we conclude that I does not change.,Macroeconomics Chapter 11,46,Inflation in the Equilibrium Business-Cycle Model,We have found that the time paths of money growth and inflation do n
34、ot affect a group of real variables.This group comprises real GDP,Y;inputs of labor and capital services,L and K;consumption and investment,C and I;the real wage rate,w/P;the real rental price,R/P;and the real interest rate,r.The neutrality of money apply,as an approximation,to the entire path of mo
35、ney growth.,Macroeconomics Chapter 11,47,Inflation in the Equilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateAnalyze how the time path of the nominal quantity of money,Mt,determines the time path of the price level,Pt,and,hence,the inflation rate,t.We also assume fo
36、r now that Yt and rt are constant over time.,Macroeconomics Chapter 11,48,Inflation in the Equilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateMt=Mt+1Mtt=Mt/MtMt+1=(1+t)Mtt=Pt/Ptt=(Pt+1Pt)/PtPt+1=(1+t)Pt,Macroeconomics Chapter 11,49,Inflation in the Equilibrium Busin
37、ess-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateShow thatWhen Mt grows steadily at the rate,the price level,Pt,will also grow steadily at the rate.=,Macroeconomics Chapter 11,50,Inflation in the Equilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest Rate
38、The real quantity of money demanded,L(Y,i),does not vary over time.real GDP,Y,is fixed.i=r+i=r+Since we assumed that r and are fixed,i is unchanging.Since Y and i are fixed,we have verified that the real quantity of money demanded,L(Y,i),is unchanging.,Macroeconomics Chapter 11,51,Inflation in the E
39、quilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateThe level of real money demanded,L(Y,i),equals the unchanging level of real money balances,Mt/Pt.L(Y,i)and Mt/Pt are both fixed over time.Therefore,if the levels of the two variables are equal in the current year,yea
40、r 1,they will remain equal in every future year.,Macroeconomics Chapter 11,52,Inflation in the Equilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateDetermination of price level:P1=M1/L(Y,i)t,is the constant=.,Macroeconomics Chapter 11,53,Inflation in the Equilibrium B
41、usiness-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateThe inflation rate,equals the unchanging growth rate of money,.Real money balances,Mt/Pt,are fixed over time.The nominal interest rate,i,equals r+,where r is the unchanging real interest rate.,Macroeconomics Chapter 11,54,Inflat
42、ion in the Equilibrium Business-Cycle Model,Money Growth,Inflation,and the Nominal Interest RateThe real quantity of money demanded,L(Y,i),is fixed over time,where Y is the unchanging real GDP.P1=M1/L(Y,i),Macroeconomics Chapter 11,55,Inflation in the Equilibrium Business-Cycle Model,A Trend in the
43、Real Demand for MoneyAssume that L(Y,i)grows steadily at the constant rate.This growth might reflect long-term growth of real GDP,Macroeconomics Chapter 11,56,Inflation in the Equilibrium Business-Cycle Model,A Trend in the Real Demand for MoneyReal money balances,Mt/Pt,increase because of growth in
44、 the numerator,Mt,at the rate,but decrease because of growth in the denominator,Pt,at the rate.growth rate of Mt/Pt=,Macroeconomics Chapter 11,57,Inflation in the Equilibrium Business-Cycle Model,A Trend in the Real Demand for MoneyIf L(Y,i)grows at rate,Mt/Pt must also grow at rate.=,Macroeconomics
45、 Chapter 11,58,Inflation in the Equilibrium Business-Cycle Model,Macroeconomics Chapter 11,59,Inflation in the Equilibrium Business-Cycle Model,A Shift in the Money Growth RateSuppose that the monetary authority raises the money growth rate from to in year T.,Macroeconomics Chapter 11,60,Inflation i
46、n the Equilibrium Business-Cycle Model,Macroeconomics Chapter 11,61,Inflation in the Equilibrium Business-Cycle Model,A Shift in the Money Growth Ratei i=Mt/Pt is constant before year T.Mt/Pt is constant after year T.Mt/Pt after year T is lower than that before year T(because of the rise in the nomi
47、nal interest rate from i to i).,Macroeconomics Chapter 11,62,Inflation in the Equilibrium Business-Cycle Model,Government Revenue from Printing MoneyHave assumed,thus far,that the monetary authority prints new money(currency)and gives it to households as transfer payments.Governments get revenue fro
48、m printing money and can use this revenue to pay for a variety of expenditures.,Macroeconomics Chapter 11,63,Inflation in the Equilibrium Business-Cycle Model,Government Revenue from Printing MoneyNominal revenue from printing money=Mt+1Mt=MtReal revenue from printing money=Mt/Pt+1 Real money growth rate t=Mt/Mt,Macroeconomics Chapter 11,64,Inflation in the Equilibrium Business-Cycle Model,Government Revenue from Printing MoneyReal revenue from printing money=t(Mt/Pt+1)t(Mt/Pt)=(money growth rate)(level of real money balances),Macroeconomics Chapter 11,65,
