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Bài giảng Kinh tế vĩ mô (dành cho học viên cao học): Chapter 20 - TS. Phan Thế Công

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Bài giảng "Kinh tế vĩ mô - Chapter 20: Mô hình IS – LM - BP" cung cấp cho người học các kiến thức: The market for foreign currency exchange, marginal propensity to import, output determination in open economy, balance of payments, BP curve, is lm bp model, monetary and fiscal policies in open economy. Mời các bạn cùng tham khảo.

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Nội dung Text: Bài giảng Kinh tế vĩ mô (dành cho học viên cao học): Chapter 20 - TS. Phan Thế Công

  1. 1/4/2016 MÔ HÌNH IS – LM - BP TS.GVC. PHAN THẾ CÔNG Email: congpt@vcu.edu.vn TS. PHAN THẾ CÔNG Topics To Be Covered • The Market for Foreign-Currency Exchange • Marginal Propensity to Import • Output Determination in Open Economy • Balance of Payments • BP Curve • IS-LM-BP Model • Monetary and Fiscal Policies in Open Economy TS. PHAN THẾ CÔNG Open and Closed Economies • A closed economy is one that does not interact with other economies in the world. There are no exports, no imports, and no capital flows. • An open economy is one that interacts freely with other economies around the world. 1
  2. 1/4/2016 TS. PHAN THẾ CÔNG An Open Economy An open economy interacts with other countries in two ways. It buys and sells goods and services in world product markets. It buys and sells capital assets in world financial markets. TS. PHAN THẾ CÔNG The Flow of Goods • Exports are domestically produced goods and services that are sold abroad. They mainly depend on exchange rates. EX = f (e) • Imports are foreign produced goods and services that are sold domestically. They mainly depend on output. IM = f (Y) TS. PHAN THẾ CÔNG The Flow of Goods • Net exports (NX) are the value of a nation’s exports minus the value of its imports. • Net exports are also called the trade balance. 2
  3. 1/4/2016 TS. PHAN THẾ CÔNG The Flow of Goods  A trade deficit is a situation in which net exports (NX) are negative. Imports > Exports  A trade surplus is a situation in which net exports (NX) are positive. Exports > Imports  Balanced trade refers to when net exports are zero – exports and imports are exactly equal. TS. PHAN THẾ CÔNG The Internationalization of Percent of GDP the Chinese Economy 50 40 30 20 10 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 TS. PHAN THẾ CÔNG The Flow of Capital • Net foreign investment refers to the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. • A Chinese resident buys stock in the Toyota corporation and an American buys stock in the Sohu corporation. 3
  4. 1/4/2016 TS. PHAN THẾ CÔNG The Flow of Capital • When a Chinese resident buys stock in IBM, the purchase raises Chinese net foreign investment. • When a Japanese resident buys a bond issued by the Chinese government, the purchase reduces the Chinese net foreign investment. TS. PHAN THẾ CÔNG The Equality of NX and NFI  Net exports (NX) and net foreign investment (NFI) are closely linked.  For an economy as a whole, NX and NFI must balance each other so that: NFI = NX  This holds true because every transaction that affects one side must also affect the other side by the same amount. TS. PHAN THẾ CÔNG Saving, Investment, and the International Flows • Net exports is a component of GDP: Y = C + I + G + NX • National saving is the income of the nation that is left after paying for current consumption and government purchases: Y - C - G = I + NX 4
  5. 1/4/2016 TS. PHAN THẾ CÔNG Saving, Investment, and the International Flows • National saving (S) equals Y-C-G so: S = I + NX or Saving = Domestic + Foreign Investment Investment TS. PHAN THẾ CÔNG Real and Nominal Exchange Rates • International transactions are influenced by international prices. • The two most important international prices are the nominal exchange rate and the real exchange rate. TS. PHAN THẾ CÔNG Nominal Exchange Rates The nominal exchange rate is the rate at which a person can trade the currency of one country for the currency of another. The nominal exchange rate is expressed in two ways: In units of foreign currency per one Chinese yuan. And in units of Chinese yuan per one unit of the foreign currency. 5
  6. 1/4/2016 TS. PHAN THẾ CÔNG Nominal Exchange Rates  Assume the exchange rate between the U.S. dollar and the Chinese yuan is one dollar to 8 yuan. One U.S. dollar trades for 8 yuan. One yuan trades for 1/8 (=0.125) of a dollar. TS. PHAN THẾ CÔNG Nominal Exchange Rates • If one yuan buys more foreign currency, there is an appreciation of the yuan. • If it buys less there is a depreciation of the yuan. TS. PHAN THẾ CÔNG Real Exchange Rates  The real exchange rate is the rate at which a person can trade the goods and services of one country for the goods and services of another.  The real exchange rate depends on the nominal exchange rate and the prices of goods in the two countries measured in local currencies. 6
  7. 1/4/2016 TS. PHAN THẾ CÔNG Real Exchange Rates Real Nominal exchange rate x Domestic price Exchange  Foreign price Rate The real exchange rate is a key determinant of how much a country exports and imports. TS. PHAN THẾ CÔNG Real Exchange Rates  A depreciation (fall) in the Chinese real exchange rate means that Chinese goods have become cheaper relative to foreign goods.  This encourages consumers both at home and abroad to buy more Chinese goods and fewer goods from other countries. TS. PHAN THẾ CÔNG Real Exchange Rates  As a result, Chinese exports rise, and Chinese imports fall, and both of these changes raise Chinese net exports.  Conversely, an appreciation in the Chinese real exchange rate means that Chinese goods have become more expensive compared to foreign goods, so Chinese net exports fall. 7
  8. 1/4/2016 TS. PHAN THẾ CÔNG Purchasing-Power Parity • The purchasing-power parity theory (PPP theory) is the simplest and most widely accepted theory explaining the variation of currency exchange rates. • According to the purchasing-power parity theory, a unit of any given currency should be able to buy the same quantity of goods in all countries. TS. PHAN THẾ CÔNG Basic Logic of Purchasing-Power Parity  The theory of purchasing-power parity is based on a principle called the law of one price.  According to the law of one price, a good must sell for the same price in all locations. TS. PHAN THẾ CÔNG Basic Logic of Purchasing-Power Parity  If the law of one price were not true, unexploited profit opportunities would exist.  The process of taking advantage of differences in prices in different markets is called arbitrage. 8
  9. 1/4/2016 TS. PHAN THẾ CÔNG Basic Logic of Purchasing-Power Parity  If arbitrage occurs, eventually prices that differed in two markets would necessarily converge.  According to the theory of purchasing- power parity, a currency must have the same purchasing power in all countries and exchange rates move to ensure that. TS. PHAN THẾ CÔNG Implications of Purchasing-Power Parity  If the purchasing power of is always the same at home and abroad, then the exchange rate cannot change.  The nominal exchange rate between the currencies of two countries must reflect the different price levels in those countries. TS. PHAN THẾ CÔNG Implications of Purchasing-Power Parity When the central bank prints large quantities of money, the money loses value both in terms of the goods and services it can buy and in terms of the amount of other currencies it can buy. 9
  10. 1/4/2016 TS. PHAN THẾ CÔNG Limitations of Purchasing-Power Parity • Many goods are not easily traded or shipped from one country to another. • Tradable goods are not always perfect substitutes when they are produced in different countries. TS. PHAN THẾ CÔNG Fixed vs. Floating Exchange Rates • A country has a fixed exchange rate if it pegs its currency at a given exchange rate and stands ready to defend that rate. • Exchange rates which are determined by market supply and demand are called flexible exchange rates or floating exchange rates. TS. PHAN THẾ CÔNG The Market for Loanable Funds • The market for loanable funds (capital market) is one in which those who want to save supply funds and those who want to borrow to invest demand funds. • It is the market in which financial resources (money, bonds, stocks) are traded. 10
  11. 1/4/2016 TS. PHAN THẾ CÔNG The Market for Loanable Funds S = I + NFI • At the equilibrium interest rate, the amount that people want to save exactly balances the desired quantities of investment and net foreign investment. TS. PHAN THẾ CÔNG The Market for Loanable Funds • The supply of loanable funds comes from national saving (S). • The demand for loanable funds comes from domestic investment (I) and net foreign investment (NFI). TS. PHAN THẾ CÔNG The Market for Loanable Funds  The supply and demand for loanable funds depend on the real interest rate.  A higher real interest rate encourages people to save and raises the quantity of loanable funds supplied.  The interest rate adjusts to bring the supply and demand for loanable funds into balance. 11
  12. 1/4/2016 TS. PHAN THẾ CÔNG The Market for Loanable Funds Real Interest Rate Supply of loanable funds (from national saving) Equilibrium real interest rate Demand for loanable funds (for domestic investment and net foreign investment) Equilibrium Quantity of quantity Loanable Funds TS. PHAN THẾ CÔNG The Market for Loanable Funds At the equilibrium interest rate, the amount that people want to save exactly balances the desired quantities of domestic investment and net foreign investment. TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange  The two sides of the foreign-currency exchange market are represented by NFI and NX.  NFI represents the imbalance between the purchases and sales of capital assets.  NX represents the imbalance between exports and imports of goods and services. 12
  13. 1/4/2016 TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange  In the market for foreign-currency exchange, the Chinese yuan is traded for foreign currencies.  For an economy as a whole, NFI and NX must balance each other out, or: NFI = NX TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange The price that balances the supply and demand for foreign-currency is the real exchange rate. TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange  The demand curve for foreign currency is downward sloping because a higher exchange rate makes domestic goods more expensive.  The supply curve is vertical because the quantity of dollars supplied for net foreign investment is unrelated to the real exchange rate. 13
  14. 1/4/2016 TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange Real Exchange Rate Supply of RMB (from net foreign investment) Equilibrium real exchange rate Demand for RMB (for net exports) Equilibrium Quantity of RMB Exchanged quantity into Foreign Currency TS. PHAN THẾ CÔNG The Market for Foreign-Currency Exchange  The real exchange rate adjusts to balance the supply and demand for RMB.  At the equilibrium real exchange rate, the demand for RMB to buy net exports exactly balances the supply of RMB to be exchanged into foreign currency to buy assets abroad. TS. PHAN THẾ CÔNG Marginal Propensity to Import • The marginal propensity to import (MPm) refers to the increase in the dollar value of imports resulting from each dollar increase in the value of GDP. IM MPM  GDP 14
  15. 1/4/2016 TS. PHAN THẾ CÔNG Output Determination in Open Economy Expenditure Output=Expenditure C = a + bY Slope(E1 )=b E1 =C(Y) +I (r )+G E2 =C(Y) +I(r )+G-IM(Y） IM = MPM.Y E2 = a +I+G+(b-m)Y 0 45° Slope(E2 )=b-m Output Y2 Y1 TS. PHAN THẾ CÔNG Output Determination in Open Economy Expenditure Output=Expenditure E2 =C(Y) +I(r )+G + EX(e) -IM(Y） 1. An E1 =C(Y) +I(r )+G-IM(Y） increase in export… 45° 0 Output Y1 Y2 2. …leads to an increase in output TS. PHAN THẾ CÔNG Equilibrium Output in Open Economy • Planned aggregate expenditure in an open economy equals: E  C  I  G  EX  IM In equilibrium: Y  C  I  G  EX  IM Y  a  bY  I  G  EX  MPM.Y 1 Y .(a  I  G  EX ) 1  b  MPM 15
  16. 1/4/2016 TS. PHAN THẾ CÔNG The Open Economy Multiplier 1 Y ( a  I  G  EX ) 1b  m  b = MPC  m = MPM  1 – b + m = 1 – MPC + MPM = MPS +MPM  The multiplier is: 1 Multiplier  MPS  MPM TS. PHAN THẾ CÔNG The Open Economy Multiplier The multiplier in the closed economy is: 1 Multiplier  MPS The multiplier in the open economy is: 1 Multiplier  MPS  MPM TS. PHAN THẾ CÔNG The Balance of Payments The balance of payment is a statement showing all of a nation’s transactions with the rest of the world for a given period. It includes purchases and sales of goods and services, gifts, government transactions, and capital movements. 16
  17. 1/4/2016 TS. PHAN THẾ CÔNG The Balance of Payments • Suppose the initial international transaction was that a Chinese company exported a plane to the U.S. for $100 million. The Chinese central bank bought $10 million for CNY 80 million. • What was Chinese balance of payments like for that year? TS. PHAN THẾ CÔNG The Balance of Payments Debit Credit Current Account Export 100,000,000 Import 0 Balance on current account 100,000,000 Capital Account Private 90,000,000 Official Reserves 10,000,000 Balance on capital account 100,000,000 TS. PHAN THẾ CÔNG The Balance of Payments Net Debits (-) or Credits (+) Current Account Export 100,000,000 Import 0 Balance on current account 100,000,000 Capital Account Private －90,000,000 Official Reserves －10,000,000 Balance on capital account － 100,000,000 Statistical Discrepancy 0 Balance of Payments 0 17
  18. 1/4/2016 TS. PHAN THẾ CÔNG The Balance of Payments United States Balance of Payments, 1999 (in billion dollars) CURRENT ACCOUNT (1) Net export of goods – 347.2 (2) Net export of services 79.6 (3) Net investment income – 24.7 (4) Net transfer payments – 46.6 (5) Balance on current account (1 + 2 + 3 + 4) – 338.9 CAPITAL ACCOUNT (6) Change in private U.S. assets abroad (increase is –) – 381.0 (7) Change in foreign private assets in the United States 706.2 (8) Change in U.S. government assets abroad (increase is –) 8.3 (9) Change in foreign government assets in the U.S. 44.5 (10) Balance on capital account (6 + 7 + 8 + 9) 378.0 STATISTICAL DISCREPENCY – 39.1 BALANCE OF PAYMENTS (5 + 10 + 11) 0 TS. PHAN THẾ CÔNG The Balance of Payments • A country’s current account is the sum of its: – net exports (exports minus imports), – net income received from investments abroad, and – net transfer payments from abroad. • Exports earn foreign exchange and are a credit (+) item on the current account. Imports use up foreign exchange and are a debit (–) item. TS. PHAN THẾ CÔNG The Balance of Payments • The balance of trade is the difference between a country’s exports of goods and services and its imports of goods and services. • A trade deficit occurs when a country’s exports are less than its imports. 18
  19. 1/4/2016 TS. PHAN THẾ CÔNG The Balance of Payments • Investment income consists of holdings of foreign assets that yield dividends, interest, rent, and profits paid to U.S. asset holders (a source of foreign exchange). • Net transfer payments are the difference between payments from the United States to foreigners and payments from foreigners to the United States. TS. PHAN THẾ CÔNG The Balance of Payments • The balance on current account consists of net exports of goods, plus net exports of services, plus net investment income, plus net transfer payments. It shows how much a nation has spent relative to how much it has earned. • For each transaction recorded in the current account, there is an offsetting transaction recorded in the capital account. TS. PHAN THẾ CÔNG The Balance of Payments • The capital account records the changes in assets and liabilities. • The balance on capital account in the United States is the sum of the following (measured in a given period): – the change in private U.S. assets abroad – the change in foreign private assets in U.S. – the change in U.S. government assets abroad – the change in foreign government assets in U.S. 19
  20. 1/4/2016 TS. PHAN THẾ CÔNG The Balance of Payments • In the absence of errors, the balance on capital account would equal the negative of the balance on current account. • If the capital account is positive, the change in foreign assets in the country is greater than the change in the country’s assets abroad, which is a decrease in the net wealth of the country. TS. PHAN THẾ CÔNG The BP Curve The BP curve is a graph of all combinations of interest (r) and output (Y) that result in foreign exchange market equilibrium. TS. PHAN THẾ CÔNG Deriving the BP Curve Net Foreign Investment The BP Curve r r BP Curve r2 E2 r2 E2 r1 r1 E1 E1 NFI2 NFI1 NFI Y1 Y2 Y 20
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