国际经济学CH

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1、Chapter 19Macroeconomic Policy and Coordination under Floating Exchange RatesSlide 19-2Copyright 2003 Pearson Education,Inc.Chapter OrganizationThe Case for Floating Exchange RatesThe Case Against Floating Exchange RatesMacroeconomic Interdependence Under a Floating RateWhat Has Been Learned Since 1

2、973?Are Fixed Exchange Rates Even and Option for Most Countries?Directions for ReformSummaryAppendix:International Policy Coordination FailuresSlide 19-3Copyright 2003 Pearson Education,Inc.IntroductionThe floating exchange rate system,in place since 1973,was not well planned before its inception.By

3、 the mid-1980s,economists and policymakers had become more skeptical about the benefits of an international monetary system based on floating rates.Why has the performance of floating rates been so disappointing?What direction should reform of the current system take?This chapter compares the macroe

4、conomic policy problems of different exchange rate regimes.Slide 19-4Copyright 2003 Pearson Education,Inc.The Case for Floating Exchange RatesThere are three arguments in favor of floating exchange rates:Monetary policy autonomySymmetryExchange rates as automatic stabilizersSlide 19-5Copyright 2003

5、Pearson Education,Inc.Monetary Policy AutonomyFloating exchange rates:Restore monetary control to central banks Allow each country to choose its own desired long-run inflation rateThe Case for Floating Exchange RatesSlide 19-6Copyright 2003 Pearson Education,Inc.SymmetryFloating exchange rates remov

6、e two main asymmetries 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 currenciesThe Case for Floating Exchange RatesSlide 19-7C

7、opyright 2003 Pearson Education,Inc.Exchange Rates as Automatic StabilizersFloating exchange rates quickly eliminate the“fundamental disequilibriums”that had led to parity changes and speculative attacks under fixed rates.Figure 19-1 shows that a temporary fall in a countrys export demand reduces th

8、at countrys output more under a fixed rate than a floating rate.The Case for Floating Exchange RatesSlide 19-8Copyright 2003 Pearson Education,Inc.AA1DD1 Figure 19-1:Effects of a Fall in Export DemandAA2DD2AA1DD2DD1E22Y2Y2 Output,Y Exchange rate,E(a)Floating exchange rate Output,Y Exchange rate,E(b)

9、Fixed exchange rateY1E11Y1 E11Y33The Case for Floating Exchange RatesSlide 19-9Copyright 2003 Pearson Education,Inc.The Case Against Floating Exchange RatesThere are five arguments against floating rates:DisciplineDestabilizing speculation and money market disturbancesInjury to international trade a

10、nd investmentUncoordinated economic policiesThe illusion of greater autonomySlide 19-10Copyright 2003 Pearson Education,Inc.DisciplineFloating exchange rates do not provide discipline for central banks.Central banks might embark on inflationary policies(e.g.,the German hyperinflation of the 1920s).T

11、he pro-floaters response was that a floating exchange rate would bottle up inflationary disturbances within the country whose government was misbehaving.The Case Against Floating Exchange RatesSlide 19-11Copyright 2003 Pearson Education,Inc.Destabilizing Speculation and Money Market DisturbancesFloa

12、ting exchange rates allow destabilizing speculation.Countries can be caught in a“vicious circle”of depreciation and inflation.Advocates of floating rates point out that destabilizing speculators ultimately lose money.Floating exchange rates make a country more vulnerable to money market disturbances

13、.Figure 19-2 illustrates this point.The Case Against Floating Exchange RatesSlide 19-12Copyright 2003 Pearson Education,Inc.AA1DD Output,Y Exchange rate,EE1Y11 Figure 19-2:A Rise in Money Demand Under a Floating Exchange RateAA2E2Y22The Case Against Floating Exchange RatesSlide 19-13Copyright 2003 P

14、earson Education,Inc.Injury to International Trade and InvestmentFloating rates hurt international trade and investment because they make relative international prices more unpredictable:Exporters and importers face greater exchange risk.International investments face greater uncertainty about their

15、 payoffs.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.The Case Against Floating Exchange RatesSlide 19-14Copyright 2

16、003 Pearson Education,Inc.Uncoordinated Economic PoliciesFloating exchange rates leave countries free to engage in competitive currency depreciations.Countries might adopt policies without considering their possible beggar-thy-neighbor aspects.The Case Against Floating Exchange RatesSlide 19-15Copyr

17、ight 2003 Pearson Education,Inc.The Illusion of Greater AutonomyFloating exchange rates increase the uncertainty in the economy without really giving macroeconomic policy greater freedom.A currency depreciation raises domestic inflation due to higher wage settlements.The Case Against Floating Exchan

18、ge RatesSlide 19-16Copyright 2003 Pearson Education,Inc.Table 19-1:Inflation Rates in Major Industrialized Countries,1973-1980 (percent per year)The Case Against Floating Exchange RatesSlide 19-17Copyright 2003 Pearson Education,Inc.Figure 19-3:Nominal and Real Effective Dollar Exchange Rates Indexe

19、s,1975-2000The Case Against Floating Exchange RatesSlide 19-18Copyright 2003 Pearson Education,Inc.Macroeconomic Interdependence Under a Floating RateAssume that there are two large countries,Home and Foreign.Macroeconomic interdependence between Home and Foreign:Effect of a permanent monetary expan

20、sion by Home Home output rises,Homes currency depreciates,and Foreign output may rise or fall.Effect of a permanent fiscal expansion by Home Home output rises,Homes currency appreciates,and Foreign output rises.Slide 19-19Copyright 2003 Pearson Education,Inc.Macroeconomic Interdependence Under a Flo

21、ating Rate Table 19-2:Unemployment Rates in Major Industrialized Countries,1978-2000(percent of civilian labor force)Slide 19-20Copyright 2003 Pearson Education,Inc.Macroeconomic Interdependence Under a Floating RateTable 19-3:Inflation Rates in Major Industrialized Countries 1981-2000,and 1961-1971

22、 Average(percent per year)Slide 19-21Copyright 2003 Pearson Education,Inc.Macroeconomic Interdependence Under a Floating RateFigure 19-4:Exchange Rate Changes Since the Louvre AccordSlide 19-22Copyright 2003 Pearson Education,Inc.What Has Been Learned Since 1973?Monetary Policy AutonomyFloating exch

23、ange rates allowed a much larger international divergence in inflation rates.High-inflation countries have tended to have weaker currencies than their low-inflation neighbors.In the short run,the effects of monetary and fiscal changes are transmitted across national borders under floating rates.Slid

24、e 19-23Copyright 2003 Pearson Education,Inc.Figure 19-5:Exchange Rate Trends and Inflation Differentials,1973-2000What Has Been Learned Since 1973?Slide 19-24Copyright 2003 Pearson Education,Inc.After 1973 central banks intervened repeatedly in the foreign exchange market to alter currency values.Wh

25、y did central banks continue to intervene even in the absence of any formal obligation to do so?To stabilize output and the price level when certain disturbances occur To prevent sharp changes in the international competitiveness of tradable goods sectorsMonetary changes had a much greater short-run

26、 effect on the real exchange rate under a floating nominal exchange rate than under a fixed one.What Has Been Learned Since 1973?Slide 19-25Copyright 2003 Pearson Education,Inc.SymmetryThe international monetary system did not become symmetric until after 1973.Central banks continued to hold dollar

27、reserves and intervene.The current floating-rate system is similar in some ways to the asymmetric reserve currency system underlying the Bretton Woods arrangements(McKinnon).What Has Been Learned Since 1973?Slide 19-26Copyright 2003 Pearson Education,Inc.The Exchange Rate as an Automatic StabilizerE

28、xperience with the two oil shocks favors floating exchange rates.The effects of the U.S.fiscal expansion after 1981 provide mixed evidence on the success of floating exchange rates.What Has Been Learned Since 1973?Slide 19-27Copyright 2003 Pearson Education,Inc.DisciplineInflation rates accelerated

29、after 1973 and remained high through the second oil shock.The system placed fewer obvious restraints on unbalanced fiscal policies.Example:The high U.S.government budget deficits of the 1980s.What Has Been Learned Since 1973?Slide 19-28Copyright 2003 Pearson Education,Inc.Destabilizing SpeculationFl

30、oating exchange rates have exhibited much more day-to-day volatility.The question of whether exchange rate volatility has been excessive is controversial.In the longer term,exchange rates have roughly reflected fundamental changes in monetary and fiscal policies and not destabilizing speculation.Exp

31、erience with floating exchange rates contradicts the idea that arbitrary exchange rate movements can lead to“vicious circles”of inflation and depreciation.What Has Been Learned Since 1973?Slide 19-29Copyright 2003 Pearson Education,Inc.International Trade and InvestmentInternational financial interm

32、ediation expanded strongly after 1973 as countries lowered barriers to capital movement.For most countries,the extent of their international trade shows a rising trend after the move to floating.What Has Been Learned Since 1973?Slide 19-30Copyright 2003 Pearson Education,Inc.Policy CoordinationFloat

33、ing exchange rates have not promoted international policy coordination.Critics of floating have not made a strong case that the problem of beggar-thy-neighbor policies would disappear under an alternative currency regime.What Has Been Learned Since 1973?Slide 19-31Copyright 2003 Pearson Education,In

34、c.Are Fixed Exchange Rates Even an Option for Most Countries?Maintaining fixed exchange rates in the long-run requires strict controls over capital movements.Attempts to fix exchange rates will necessarily lack credibility and be relatively short-lived.Fixed rates will not deliver the benefits promi

35、sed by their proponents.Slide 19-32Copyright 2003 Pearson Education,Inc.Directions for ReformThe experience of floating does not fully support either the early advocates of that exchange rate system or its critics.One unambiguous lesson of experience is that no exchange rate system functions well wh

36、en international economic cooperation breaks down.Severe limits on exchange rate flexibility are unlikely to be reinstated in the near future.Increased consultation among policymakers in the industrial countries should improve the performance of floating rates.Slide 19-33Copyright 2003 Pearson Educa

37、tion,Inc.SummaryThe weaknesses of the Bretton Woods system led many economists to advocate floating exchange rates before 1973 based on three arguments:Floating rates would give countries greater autonomy in managing their economies.Floating rates would remove the asymmetries of the Bretton Woods sy

38、stem.Floating rates would quickly eliminate the“fundamental disequilibriums.”Slide 19-34Copyright 2003 Pearson Education,Inc.SummaryCritics of floating rates advanced several counterarguments:Floating would encourage monetary and fiscal excesses and beggar-thy-neighbor policies.Floating rates would

39、be subject to destabilizing speculation and retard international trade and investment.Slide 19-35Copyright 2003 Pearson Education,Inc.SummaryBetween 1973 and 1980 floating rates seemed on the whole to function well.A sharp turn toward slower monetary growth in the U.S.contributed to massive dollar a

40、ppreciation between 1980 and early 1985.The experience of floating does not fully support either the early advocates of that exchange rates system or its critics.Slide 19-36Copyright 2003 Pearson Education,Inc.Appendix:International Policy Coordination Failures*=-1%U*=1%=-1%U=1%Figure 19A-1:Hypothet

41、ical Effects of Different Monetary Policy Combinations on Inflation and Unemployment*=0%U*=0.5%=-2%U=1.75%*=-2%U*=1.75%=0%U=0.5%*=-1.25%U*=1.5%=-1.25%U=1.5%Slide 19-37Copyright 2003 Pearson Education,Inc.Appendix:International Policy Coordination Failures Figure 19A-2:Payoff Matrix for Different Monetary Policy Moves