FMI7e_ch05Monetary Theory and Policy(金融市场好机构―7e, b

1Chapter5MonetaryTheoryandPolicyFinancialMarketsandInstitutions,7e,JeffMaduraCopyright©2006bySouth-Western,adivisionofThomsonLearning.Allrightsreserved.2ChapterOutlineMonetarytheoryTradeofffacedbytheFedEconomicindicatorsmonitoredbytheFedLagsinmonetarypolicyAssessingtheimpactofmonetarypolicyIntegratingmonetaryandfiscalpoliciesGlobaleffectsofmonetarypolicy3MonetaryTheoryPureKeynesianTheoryOneofthemostpopulartheoriesinfluencingtheFedDevelopedbyJohnMaynardKeynesSuggestshowtheFedcanaffecttheinteractionbetweenthedemandformoneyandthesupplyofmoneytoinfluence:InterestratesTheaggregatelevelofspendingEconomicgrowth4MonetaryTheory(cont’d)PureKeynesianTheory(cont’d)CanbeexplainedbyusingtheloanablefundsframeworkDemandforandsupplyofloanablefundsdeterminetheequilibriuminterestrateThebusinessinvestmentscheduleillustratestheinverserelationshipbetweeninterestratesonloanablefundsandthelevelofbusinessinvestment5MonetaryTheory(cont’d)PureKeynesianTheory(cont’d)CorrectingaweakeconomyTheFedwoulduseopenmarketoperationstoincreasethemoneysupplyAhigherlevelofthemoneysupplywouldreduceinterestratesLowerinterestratesencouragemoreborrowingandspendingKeynesianphilosophyadvocatesanactiveroleforthegovernmentincorrectingeconomicproblems6MonetaryTheory(cont’d)S2CorrectingaWeakEconomyD1i2i1S1DemandandSupplyofLoanableFundsBusinessInvestmentSchedulei1i2B1B27MonetaryTheory(cont’d)PureKeynesianTheory(cont’d)CorrectinghighinflationTheFedwouldsellTreasurysecurities(decreasethemoneysupply)AlowerlevelofthemoneysupplyreducesthelevelofspendingLessspendingslowseconomicgrowthandreducesinflationarypressure(demand-pullinflation)8MonetaryTheory(cont’d)S1CorrectingHighInflationD1i1i2S2DemandandSupplyofLoanableFundsBusinessInvestmentSchedulei2i1B2B19MonetaryTheory(cont’d)PureKeynesianTheory(cont’d)EffectsofacreditcrunchonastimulativepolicyTheeconomicimpactofmonetarypolicydependsonthewillingnessofbankstolendfundsIfbanksareunwillingtoextendcreditdespiteastimulativepolicy,theresultisacreditcrunchAcreditcrunchcanoccurduringarestrictivepolicysincesomeborrowerswillnotborrowbecauseofthehighinterestrates10MonetaryTheory(cont’d)QuantityTheoryandtheMonetaristapproachThequantitytheorysuggestsaparticularrelationshipbetweenthemoneysupplyandthedegreeofeconomicactivityintheequationofexchange:VelocityistheaveragenumberoftimeseachdollarchangeshandsperyearTherightsideoftheequationisthetotalvalueofgoodsandservicesproducedIfvelocityisconstant,achangeinthemoneysupplywillproduceapredictablechangeinthetotalvalueofgoodsandservicesQPMVG11MonetaryTheory(cont’d)QuantityTheoryandtheMonetaristapproach(cont’d)AnearlyformofthetheoryassumedaconstantQAssumesadirectrelationshipbetweenthemoneysupplyandpricesUnderthemodernquantitytheoryofmoney,theconstantquantityassumptionshasbeenrelaxedAdirectrelationshipexistsbetweenthemoneysupplyandthevalueofgoodsandservices12MonetaryTheory(cont’d)QuantityTheoryandtheMonetaristapproach(cont’d)VelocityrepresentstheratioofmoneystocktonominaloutputVelocityisaffectedbyanyfactorthatinfluencesthisratio:IncomepatternsFactorsthatchangetheratioofhouseholds’moneyholdingstoincomeCreditcardsInflationaryexpectations13MonetaryTheory(cont’d)ComparisonoftheMonetaristandKeynesianTheoriesTheMonetaristapproachadvocatesstable,lowgrowthinthemoneysupplyAllowseconomicproblemstoresolvethemselvesKeynesianapproachwouldcallforaloosemonetarypolicytocurearecession14MonetaryTheory(cont’d)ComparisonoftheMonetaristandKeynesianTheories(cont’d)MonetaristsareconcernedaboutmaintaininglowinflationandarewillingtotolerateanaturalrateofunemploymentKeynesiansfocusonmaintaininglowunemploymentandarewillingtotolerateanyinflationthatresultsfromstimulativemonetarypolicies15MonetaryTheory(cont’d)TheoryofRationalExpectationsHoldsthatthepublicaccountsforallexistinginformationwhenformingitsexpectationsSuggeststhathouseholdsandbusinesswillusehistoricaleffectsofmonetarypolicytoforecasttheimpactofanexistingpolicyandactaccordinglyHouseholdsspendmorewithaloosemonetarypolicytoavoidinflationBusinesseswillincreasetheirinvestmentwithaloosemonetarypolicytoavoidhighercostsLabormarketparticipantswillnegotiatehigherwageswithaloosemonetarypolicySupportstheMonetaristviewthatchangesinmonetarypolicydonothaveasustainedimpactontheeconomy16MonetaryTheory(cont’d)Whichtheoryiscorrect?TheFOMCrecognizesthevirtuesandlimitationsofeachtheoryTheFOMCadjustsmonetarygrowthtargetstocontroleconomicgrowth,inflation,andunemploymentRecognizingtheMonetaristview,theFOMCisconcernedabouttheinflationresultingfromaloosemonetarypolicy17TradeoffFacedbytheFedIdeally,theFedwouldlike:LowinflationSteadyGDPgrowthLowunemploymentThereisanegativerelationshipbetweenunemploymentandinflationPhillipscurveAtightmoneypolicycancurbinflationbutincreaseunemploymentandviceversa18TradeoffFacedbytheFed(cont’d)ImpactofotherforcesonthetradeoffCostfactorssuchasenergycostsandinsurancecostscaninfluencethetradeoffWhenbothinflationandunemploymentarehigh,Fedmembersmaydisagreeastothetypeofmonetarypolic