ch曼昆宏观经济学实用实用教案

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1、 How are inflation and unemployment related in the short run? In the long run? What factors alter this relationship? What is the short-run cost of reducing inflation? Why were U.S. inflation and unemployment both so low in the 1990s?1第1页/共37页第一页，共38页。2Introduction In the long run, inflation & unempl

2、oyment are unrelated: The inflation rate depends mainly on growth in the money supply. Unemployment (the “natural rate”) depends on the minimum wage, the market power of unions, efficiency wages, and the process of job search. One of the Ten Principles: In the short run, society faces a trade-off be

3、tween inflation and unemployment.第2页/共37页第二页，共38页。3(1) The Phillips Curve第3页/共37页第三页，共38页。4The Phillips Curve Phillips curve: shows the short-run trade-off between inflation and unemployment 1958: A.W. Phillips showed that nominal wage growth was negatively correlated with unemployment in the U.K. 1

4、960: Paul Samuelson & Robert Solow found a negative correlation between U.S. inflation & unemployment, named it “the Phillips Curve.”第4页/共37页第四页，共38页。5Deriving the Phillips Curve Suppose P = 100 this year. The following graphs show two possible outcomes for next year:A.Aggregate demand low, small in

5、crease in P (i.e., low inflation), low output, high unemployment.B.Aggregate demand high, big increase in P (i.e., high inflation), high output, low unemployment.第5页/共37页第五页，共38页。6Deriving the Phillips Curveu-rateinflationPCA. Low aggregate demand, low inflation, high u-rateB. High aggregate demand,

6、 high inflation, low u-rateYPSRASAD1AD2Y1103A105Y2B6%3%A4%5%B第6页/共37页第六页，共38页。7The Phillips Curve: A Policy Menu? Since fiscal and monetary policy affect aggregate demand, the Phillips curve (PC) appeared to offer policymakers a menu of choices: low unemployment with high inflation low inflation wit

7、h high unemployment anything in between 1960s: U.S. data supported the Phillips curve. Many believed the PC was stable & reliable.第7页/共37页第七页，共38页。8Evidence for the Phillips Curve?Inflation rate (% per year)Unemployment rate (%)During the 1960s, U.S. policymakers opted for reducing unemployment at t

8、he expense of higher inflation196163656264666768第8页/共37页第八页，共38页。9(2) Shifts in Phillips Curve: Role of Expectations第9页/共37页第九页，共38页。10(A) The Vertical Long-Run Phillips Curve 1968: Milton Friedman and Edmund Phelps argued that the tradeoff was temporary. Natural-rate hypothesis: the claim that unem

9、ployment eventually returns to its normal or “natural” rate, regardless of the inflation rate Based on the classical dichotomy and the vertical LRAS curve第10页/共37页第十页，共38页。The Vertical Long-Run Phillips Curveu-rateinflationIn the long run, faster money growth only causes faster inflation. YPLRASAD1A

10、D2Natural rate of outputNatural rate of unemploymentP1P2LRPClow infla-tionhigh infla-tion11第11页/共37页第十一页，共38页。12(B) Reconciling Theory and Evidence Evidence (from 60s): PC slopes downward. Theory (Friedman and Phelps): PC is vertical in the long run. To bridge the gap between theory and evidence, Fr

11、iedman and Phelps introduced a new variable: expected inflation a measure of how much people expect the price level to change. 第12页/共37页第十二页，共38页。13(C) The Phillips Curve EquationShort run The Central Bank can reduce u-rate below the natural u-rate by making inflation greater than expected. (Note th

12、at b 0.)Long run Expectations catch up to reality (when expected inflation = actual inflation), u-rate goes back to natural u-rate whether inflation is high or low. Unemp. rateNatural rate of unemp.= bActual inflationExpected inflation 第13页/共37页第十三页，共38页。14(D) How Expected Inflation Shifts the PCIni

13、tially, expected & actual inflation = 3%,unemployment = natural rate (6%). Central Bank makes inflation 2% higher than expected, u-rate falls to 4%. In the long run, expected inflation increases to 5%, PC shifts upward, unemployment returns to its natural rate. u-rateinflationPC1LRPC6%3%PC24%5%ABC第1

14、4页/共37页第十四页，共38页。Natural rate of unemployment = 5%Expected inflation = 2%In PC equation, b = 0.5A.Plot the long-run Phillips curve.B.Find the u-rate for each of these values of actual inflation: 0%, 6%. Sketch the short-run PC.C.Suppose expected inflation rises to 4%. Repeat part B. D.Instead, suppo

15、se the natural rate falls to 4%. Draw the new long-run Phillips curve, then repeat part B. 15第15页/共37页第十五页，共38页。16LRPCAAn increase in expected inflation shifts PC to the right.PCDLRPCDPCBPCCA fall in the natural rate shifts both curves to the left.第16页/共37页第十六页，共38页。17(E) The Breakdown of the Philli

16、ps CurveInflation rate (% per year)Unemployment rate (%)Early 1970s: unemployment increased, despite higher inflation. Friedman & Phelps explanation: expectations were catching up with reality.1961636562646667686970717273第17页/共37页第十七页，共38页。18(3) Shifts in Phillips Curve: Role of Supply Shocks第18页/共3

17、7页第十八页，共38页。19Another PC Shifter: Supply Shocks Supply shock: an event that directly alters firms costs and prices, shifting the AS and PC curves Example: large increase in oil prices 第19页/共37页第十九页，共38页。20How an Adverse Supply Shock Shifts the PCu-rateinflationSRAS shifts left, prices rise, output &

18、 employment fall.Inflation & u-rate both increase as the PC shifts upward.YPSRAS1ADPC1PC2ABSRAS2AY1P1Y2BP2第20页/共37页第二十页，共38页。21The 1970s Oil Price ShocksThe Fed (U.S. Central Bank) chose to accommodate the first shock in 1973 with faster money growth.Result: Higher expected inflation, which further

19、shifted PC. 1979: Oil prices surged again, worsening the Feds tradeoff. 38.001/198132.501/198014.851/197910.111/1974$ 3.561/1973Oil price per barrel第21页/共37页第二十一页，共38页。22The 1970s Oil Price ShocksInflation rate (% per year)Unemployment rate (%)Supply shocks & rising expected inflation worsened the P

20、C tradeoff.1972737475767778798081第22页/共37页第二十二页，共38页。23(4) The Cost of Reducing Inflation第23页/共37页第二十三页，共38页。24The Cost of Reducing Inflation Disinflation: a reduction in the inflation rate To reduce inflation, the Fed (U.S. Central Bank) must slow the rate of money growth, which reduces aggregate d

21、emand. Short run: Output falls and unemployment rises. Long run: Output & unemployment return to their natural rates. 第24页/共37页第二十四页，共38页。25(A) Disinflationary Monetary PolicyContractionary monetary policy moves economy from A to B.Over time, expected inflation falls, PC shifts downward.In the long

22、run, point C: the natural rate of unemployment, &lower inflation. u-rateinflationLRPCPC1natural rate of unemploymentAPC2CB第25页/共37页第二十五页，共38页。26(B) Sacrifice Ratio Disinflation requires enduring a period of high unemployment and low output. Sacrifice ratio: percentage points of annual output lost (o

23、ver the years) per 1 percentage point reduction in inflation Typical estimate of the sacrifice ratio: 5 To reduce inflation rate 1%, must sacrifice 5% of a years output. Can spread cost over time, e.g. To reduce inflation by 6%, can either sacrifice 30% of GDP for one year sacrifice 10% of GDP for t

24、hree years第26页/共37页第二十六页，共38页。27(C) Rational Expectations, Costless Disinflation? Rational expectations: a theory according to which people optimally use all the information they have, including information about government policies, when forecasting the future Early proponents: Robert Lucas, Thomas

25、 Sargent, Robert Barro Implied that disinflation could be much less costly第27页/共37页第二十七页，共38页。28Rational Expectations, Costless Disinflation? Suppose the Central Bank convinces everyone it is committed to reducing inflation. Then, expected inflation falls, the short-run PC shifts downward quickly. R

26、esult: Disinflations can cause less unemployment than the traditional sacrifice ratio predicts. In the extreme case, it could be close to zero, when people adjust inflation expectation immediately. 第28页/共37页第二十八页，共38页。29(D) The Volcker DisinflationFed Chairman Paul VolckerAppointed in late 1979 unde

27、r high inflation & unemploymentChanged Fed policy to disinflation1981-1984: Fiscal policy was expansionary, so Fed policy had to be very contractionary to reduce inflation.Success: Inflation fell from 10% to 4%,but at the cost of high unemployment第29页/共37页第二十九页，共38页。30The Volcker DisinflationInflati

28、on rate (% per year)Unemployment rate (%)Disinflation turned out to be very costlyu-rate near 10% in 1982-8319798081828384858687第30页/共37页第三十页，共38页。31(E) The Greenspan Era 1986: Oil prices fell 50%. 1989-90: Unemployment fell, inflation rose. Fed raised interest rates, caused a mild recession. 1990s:

29、 Unemployment and inflation fell. 2001: Negative demand shocks created the first recession in a decade. Policymakers responded with expansionary monetary and fiscal policy. Alan Greenspan Chair of FOMC, Aug 1987 Jan 2006第31页/共37页第三十一页，共38页。32The Greenspan EraInflation rate (% per year)Unemployment r

30、ate (%)Inflation and unemployment were low during most of Alan Greenspans years as Fed Chairman.198790922000949698060205第32页/共37页第三十二页，共38页。33(F) Ben Bernankes challenges Aggregate demand shocks: Subprime mortgage crisis, falling housing prices, widespread foreclosures, financial sector troubles. Ag

31、gregate supply shocks: Rising prices of food/agricultural commodities, e.g.,Corn per bushel: $2.10 in 2005-06, $5.76 in 5/2008 Rising oil pricesOil per barrel: $35 in 2/2004, $134 in 6/2008 From 6/2007 to 6/2008, unemployment rose from 4.6% to 5.5% CPI inflation rose from 2.6% to 4.9%第33页/共37页第三十三页，

32、共38页。34CONCLUSION The theories in this chapter come from some of the greatest economists of the 20th century. They teach us that inflation and unemployment areunrelated in the long runnegatively related in the short run affected by expectations, which play an important role in the economys adjustmen

33、t from the short-run to the long run. 第34页/共37页第三十四页，共38页。 The Phillips curve describes the short-run tradeoff between inflation and unemployment. In the long run, there is no tradeoff: inflation is determined by money growth, while unemployment equals its natural rate. Supply shocks and changes in

34、expected inflation shift the short-run Phillips curve, making the tradeoff more or less favorable. 35第35页/共37页第三十五页，共38页。 The Central Bank can reduce inflation by contracting the money supply, which moves the economy along its short-run Phillips curve and raises unemployment. In the long run, though

35、, expectations adjust and unemployment returns to its natural rate. Some economists argue that a credible commitment to reducing inflation can lower the costs of disinflation by inducing a rapid adjustment of expectations. 36第36页/共37页第三十六页，共38页。 ECON1002C/D (2011) Ch 22: SHORT-RUN INF. & U-RATE TRADE-OFF37感谢您的欣赏(xnshng)！第37页/共37页第三十七页，共38页。NoImage内容(nirng)总结In this chapter, look for the answers to these questions:。anything in between。Unemployment rate (%)。(B) Sacrifice Ratio。Aggregate supply shocks:。Rising oil prices。感谢您的欣赏(xnshng)第三十八页，共38页。