宏观经济学课件(英文版)10

,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,May 19, 2003,*,Chapter 10,The Demand for Money and the Price Level,1,Concepts of Money,Our model has three forms of assets: money, bonds, and ownership of capital.,Our analysis in chapters 6-8 under the assumption that each household held a constant stock of money,M,.,Why households hold part of their assets as money?,Demand for money,.,2,Concepts of Money,Assumed that money is the sole,medium of exchange,in the economy.,Households do not directly exchange goods for goods (a process called,barter,) or bonds for goods, and so on.,The money in our model matches up with,paper currency,issued by a government.,3,Concepts of Money,These paper currencies are sometimes called,fiat money,because they have value due to government fiat, rather than through intrinsic value.,At earlier times, societies tended to rely more on,commodity money, such as gold and silver coins, which do have intrinsic value.,4,Concepts of Money,Why this money might occupy the dominant position as an economys medium of exchange?,First, the government may impose legal restrictions that prevent private parties, such as Microsoft Corporation, from issuing small-size, interest-bearing bonds that could serve conveniently as hand-to-hand currency.,5,Concepts of Money,Further, the government may enact statutes that reinforce the use of its money.,As an example, there is the proclamation that the U.S. dollar is “legal tender for all debts public and private.,Also, U.S. courts are more inclined to enforce contracts that are denominated in U.S. dollars rather than in some other unit.,6,Concepts of Money,Another consideration is the cost of establishing ones money as reliable and convenient.,Another consideration is the cost of establishing ones money as reliable and convenient.,Because of these costs, money would always tend to bear interest at a rate lower than bonds.,In fact, because of the inconvenience of paying interest on hand-to-hand currency, the interest rate on currency is typically zero.,7,Concepts of Money,The theoretical construct corresponds most closely to currency held by the public.,The term “money typically refers to a monetary aggregate that is broader than currency.,The most common definition, called M1, attempts to classify as money the assets that serve regularly as media of exchange.,8,Concepts of Money,This concept adds to currency held by the public the,checkable deposits,issued by banks and other financial institutions.,9,Concepts of Money,10,Concepts of Money,11,Concepts of Money,Still broader definitions of money add in other kinds of deposits held at financial institutions.,For example,M2,includes household holdings of savings deposits, time deposits, and retail money-market mutual funds.,An even broader aggregate,M3, adds in institutional money-market funds, large time deposits, repurchase agreements, and Eurodollar accounts.,12,Concepts of Money,However, the M2 and M3 definitions go beyond the concept of money as a medium of exchange.,In our model, it is best to identify money with currency held by the public.,13,The Demand for Money,We now extend the micro foundations of our model to consider the demand for money.,Since we identify money with hand-to-hand currency, we assume that the interest rate paid on money is zero.,In contrast, the rate of return on bonds and ownership of capital equals the interest rate,i, which we assume is greater than zero.,We refer to bonds and ownership of capital as,interest-bearing assets,.,14,The Demand for Money,since households use money to make exchanges, households will hold some money for convenience, rather that always cashing in earning assets immediately prior to each exchange.,That is, the demand for money will be greater than zero.,15,The Demand for Money,Households receive nominal labor income,wL, and nominal asset income,i(B+PK),in the form of money.,Households also use money to buy consumption goods, in the nominal amount,PC, and to save, in the nominal amount,B + PK,.,16,The Demand for Money,We assume, as a general matter, that households can reduce their average money balance by incurring more,transaction costs,.,The general idea is that, by putting more effort into money management and, thereby, incurring more transaction costs, households can reduce their average holding of money,M,.,17,The Demand for Money,For a given total of nominal assets,M + B + PK, a reduction in,M,raises the average holding of interest-bearing assets,B + PK,.,Since asset income is,i(B+PK),the rise in,B + PK,raises asset income.,Thus, a households average holding of money,M, emerges from a tradeoff.,18,The Demand for Money,With a frequent transaction strategy,M,will be low and asset income will be high, but transaction costs will also be high.,With an infrequent transactions strategy,M,will be high and asset income will be low, but transaction costs will also be low.,Households choices of money holdings therefore involve finding the right balance between additional asset income and added transaction costs.,19,The Demand for Money,20,The Price Level and the Demand for Money,Suppose that the price level,P, doubles.,Assume that the nominal wage rate,w, and the nominal rental price,R, also double, so that the real wage rate,w/P,and the real rental price,R/P, do not change.,In this case, household nominal income,wL + i(B+PK),is twice as high as before.,However, household real income,(w/P)L + i(B/P + K),is unchanged.,21,The Price Level and the Demand for Money,Thus, we are considering a doubling of the nominal values of all variables, with no changes in the real values.,In this circumstance, households would also want to double the nominal quantity of money,M, that they hold.,This doubling of nominal money means that real money balances,M/P, do not change.,the,real demand for money,M,d,/P, is unchanged.,22,The,I,nterest,R,ate and the,D,emand for,M,oney,A higher interest rate,i,provides a greater incentive to hold down average holdings of money,M, in order to raise average holdings of interest- bearing assets, B+PK.,That is, with a higher,i, households would be more willing to incur transaction costs in order to reduce,M,.,For a given price level,P, we can also say that a higher,i,lowers the real demand for money,M,d,/P,.,23,Real GDP and the Demand for Money,real income = (w/P)L + i(B/P + K).,real income = (w/P)L + (R/P)K K.,real income = Y K,= real net domestic product.,Thus, for given depreciation,K, the aggregate of household real income is determined by,Y,.,We therefore have that the aggregate real demand for money,M,d,/P, rises with,Y,.,24,Other Influences on Money Demand,For given values of the price level,P, the interest rate,i, and real GDP,Y, money demand depends on the payments technology and the level of transaction costs.,25,The Money-Demand Function,26,The Money-Demand Function,27,Determination of the Price Level,The central idea is to add a new equilibrium condition:,the quantity of money equals the quantity demanded.,28,The Quantity of Money Equals the Quantity Demanded,We assume that money takes the form of currency.,We assume further that the nominal quantity of money,M, is determined by the monetary authority.,29,The Quantity of Money Equals the Quantity Demanded,30,The Quantity of Money Equals the Quantity Demanded,31,The Quantity of Money Equals the Quantity Demanded,This real demand is determined, for a given transactions technology, by real GDP,Y, and the interest rate,i,.,32,The Quantity of Money Equals the Quantity Demanded,33,The Quantity of Money Equals the Quantity Demanded,34,The Quantity of Money Equals the Quantity Demanded,35,The Quantity of Money Equals the Quantity Demanded,36,A Change in the Quantity of Money,37,A Change in the Quantity of Money,In particular, we are assuming that real GDP,Y, and the interest rate,i, remain the same.,We then found that a doubling of,M,led to a doubling of,P,and, hence, to no change in real money balances,M/P,.,This constancy of,M/P,is consistent with our assumption that the real demand for money,(Y, i),does not change.,38,A Change in the Quantity of Money,That is, after the doubling of,M, we still have that real money balances,M/P, equal the real quantity demanded,(Y, i),.,If we consider the labor market, we find that the market clearing real wage rate,w/P, does not change.,Since the price level,P, doubled, the constancy of,w/P,means that, in general equilibrium, the nominal wage rate,w, has to double.,39,A Change in the Quantity of Money,Similarly, if we look at the rental market for capital services, we find that the market-clearing real rental price,R/P, does not change.,Since the price level,P, doubled and,R/P,is unchanged, in general equilibrium, the nominal rental price,R, has to double.,40,A Change in the Quantity of Money,41,A Change in the Quantity of Money,42,A Change in the Quantity of Money,We have verified that real GDP,Y, and the interest rate,i,the two determinants of real money demand,(Y, i),are unchanged.,Therefore,(Y, i),does not change.,43,A Change in the Quantity of Money,To sum up, we find that a doubling of the nominal quantity of money,M, leads to a doubling of all of the nominal pricesthe price level,P, the nominal wage rate,w, and the nominal rental price,R,.,Hence, there are no changes in real money balances,M/P, the real wage rate,w/P, and the real rental price,R/P,.,44,A Change in the Quantity of Money,We also have that the determinants of the real demand for money,(Y, i), remain the same.,In particular, the increase in,M,has no effect on real GDP,Y, or the interest rate,i,.,Note, however, that nominal GDP equals,PY,.,Since,P,doubles and,Y,is unchanged, nominal GDP doubles.,45,A Change in the Quantity of Money,46,The,N,eutrality of,M,oney,The results exhibit a property called the,neutrality of money,.,One-time changes in the nominal quantity of money,M, affect nominal variables but leave real variables unchanged.,Almost all economists accept the neutrality of money as a valid long-run proposition.,That is, in the long run, more or less nominal money,M, in the economy influences nominal variables but not real ones.,47,The,N,eutrality of,M,oney,However, many economists believe that the neutrality of money fails to hold in the short run.,In particular, in the short run, increases in the nominal quantity of money,M, are usually thought to increase real GDP,Y, whereas decreases in,M,are thought to decrease,Y,.,48,The,N,eutrality of,M,oney,The main source of the difference in conclusions involves the flexibility of nominal prices, notably the price level,P, and the nominal wage rate,w,.,49,A Change in the Demand for Money,50,A Change in the Demand for Money,51,A Change in the Demand for Money,52,A Change in the Demand for Money,A change in,M,is fully neutral, whereas a change in the real demand for money is not fully neutral.,53,The Cyclical Behavior of the Price Level and Real Money Balances,54,The Cyclical Behavior of the Price Level and Real Money Balances,55,The Cyclical Behavior of the Price Level and Real Money Balances,56,The Cyclical Behavior of the Price Level and Real Money Balances,57,The Cyclical Behavior of the Price Level and Real Money Balances,58,Price-Level Targeting and Endogenous Money,Up to now, we have assumed that the nominal quantity of money,M, is constant.,This assumption is unrealistic.,First, the various measures of,M,have positive trends, that is, the average growth rate of money is greater than zero.,Second, each measure of,M,tends to fluctuate around its trend.,59,Price-Level Targeting and Endogenous Money,Some of these fluctuations reflect random variations, not controlled by the monetary authority.,However, much of the variation likely reflects purposeful monetary policy, aimed at achieving desired values of some of the macroeconomic variables.,60,Price-Level Targeting and Endogenous Money,We assume here that the monetary authority can determine the path of the nominal quantity of money,M, possibly subject to some uncontrollable random errors.,The assumption that the monetary authority can control,M,is reasonable if we take a narrow view of money as currency held by the public.,61,Price-Level Targeting and Endogenous Money,We assume now that the monetary authoritys objective is to adjust the nominal quantity of money,M, to achieve stability of the price level,P,.,This objective is called,price-level targeting,.,In this analysis,M,becomes an endogenous variable.,That is,M,is determined by the model to be the value consistent with the monetary authoritys objective, in this case, maintenance of a stable,P,.,62,Price-Level Targeting and Endogenous Money,63,Price-Level Targeting and Endogenous Money,To consider the trend in the nominal quantity of money,M, we should return to the analysis of long-run economic growth from the Solow model of chapter 5.,We consider the long-run or steady-state situation, in which real GDP,Y, grows at a constant rate due to technological progress and population growth.,64,Price-Level Targeting and Endogenous Money,The interest rate,i, is constant in the steady state.,Therefore, the growth of,Y,produces a continuing rise in the real demand for money,(Y, i),.,In this case, maintenance of a constant price level,P, requires,M,to grow at the same rate as,Y,.,65,Price-Level Targeting and Endogenous Money,Thereby, the growth rate of,M,matches the growth rate of,(Y, i),and allows,P,to remain constant.,66,Price-Level Targeting and Endogenous Money,Now we consider the cyclical behavior of the nominal quantity of money,M,.,The important result from before is that the real demand for money,(Y, i), is high in a boom and low in a recession.,We also found that, if,M,did not vary, the price level,P, would fall in a boom and rise in a recession.,That is,P,would be countercyclical.,67,Price-Level Targeting and Endogenous Money,68,Price-Level Targeting and Endogenous Money,Price-level targeting dictates that the nominal quantity of money,M, should be relatively high in booms and relatively low in recessions.,M,should be procyclical.,69,Price-Level Targeting and Endogenous Money,Recall, however, that we already found that the price level,P, is countercyclical.,Therefore, the monetary authority (the Federal Reserve) apparently has not pursued a monetary policy that is sufficiently procyclical to eliminate the countercyclical behavior of,P,.,70,