宏观经济学-帕金-课件(2).ppt

9THE EXCHANGE RATEAND THE BALANCE OFPAYMENTS 2012 Pearson Addison-Wesley 2012 Pearson Addison-WesleyThe dollar,the yen,and the euro are three of the worlds monies.In October 2000,one U.S.dollar bought 1.17 euros.From 2000 through 2008,the dollar sank against the euro and by July 2008 one U.S.dollar bought only 0.63 euros.Why did the dollar fall against the euro?Should the United States do anything to stabilize the foreign exchange value of the dollar?The U.S.economy has become attractive to foreign investors.What determines the amount of international borrowing and lending?2012 Pearson Addison-WesleyThe Foreign Exchange MarketTo buy goods and services produced in another country we need money of that country.Foreign bank notes,coins,and bank deposits are called foreign currency.We get foreign currency in the foreign exchange market.2012 Pearson Addison-WesleyTrading CurrenciesWe get foreign currency and foreigners get U.S dollars in the foreign exchange market.The foreign exchange market is the market in which the currency of one country is exchanged for the currency of another.The Foreign Exchange Market 2012 Pearson Addison-WesleyExchange RatesThe price at which one currency exchanges for another is called a foreign exchange rate.A fall in the value of one currency in terms of another currency is called currency depreciation.A rise in value of one currency in terms of another currency is called currency appreciation.The Foreign Exchange Market 2012 Pearson Addison-WesleyAn Exchange Rate Is a PriceAn exchange rate is the pricethe price of one currency in terms of another.Like all prices,an exchange rate is determined in a marketthe foreign exchange market.The U.S.dollar is demanded and supplied by thousands of traders every hour of every day.With many traders and no restrictions,the foreign exchange market is a competitive market.The Foreign Exchange Market 2012 Pearson Addison-WesleyThe Foreign Exchange MarketThe Demand for One Money Is the Supply of Another MoneyWhen people who are holding one money want to exchange it for U.S.dollars,they demand U.S.dollars and they supply that other countrys money.So the factors that influence the demand for U.S.dollars also influence the supply of Canadian dollars,E.U.euros,U.K.pounds,and Japanese yen.And the factors that influence the demand for another countrys money also influence the supply of U.S.dollars.2012 Pearson Addison-WesleyDemand in the Foreign Exchange MarketThe quantity of U.S.dollars that traders plan to buy in the foreign exchange market during a given period depends on1.The exchange rate2.World demand for U.S.exports3.Interest rates in the United States and other countries4.The expected future exchange rateThe Foreign Exchange Market 2012 Pearson Addison-WesleyThe Law of Demand for Foreign ExchangeThe demand for dollars is a derived demand.People buy U.S.dollars so that they can buy U.S.-produced goods and services or U.S.assets.Other things remaining the same,the higher the exchange rate,the smaller is the quantity of U.S.dollars demanded in the foreign exchange market.The Foreign Exchange Market 2012 Pearson Addison-WesleyThe exchange rate influences the quantity of U.S.dollars demanded for two reasons:Exports effectExpected profit effectExports EffectThe larger the value of U.S.exports,the greater is the quantity of U.S.dollars demanded on the foreign exchange market.The lower the exchange rate,the greater is the value of U.S.exports,so the greater is the quantity of U.S.dollars demanded.The Foreign Exchange Market 2012 Pearson Addison-WesleyExpected Profit EffectThe larger the expected profit from holding U.S.dollars,the greater is the quantity of U.S.dollars demanded today.But expected profit depends on the exchange rate.The lower todays exchange rate,other things remaining the same,the larger is the expected profit from buying U.S.dollars and the greater is the quantity of U.S.dollars demanded today.The Foreign Exchange Market 2012 Pearson Addison-WesleyThe Demand Curve for U.S.DollarsFigure 9.1 illustrates the demand curve for U.S.dollars on the foreign exchange market.The Foreign Exchange Market 2012 Pearson Addison-WesleySupply in the Foreign Exchange MarketThe quantity of U.S.dollars supplied in the foreign exchange market is the amount that traders plan to sell during a given time period at a given exchange rate.This quantity depends on many factors but the main ones are1.The exchange rate2.U.S.demand for imports3.Interest rates in the United States and other countries4.The expected future exchange rateThe Foreign Exchange Market 2012 Pearson Addison-WesleyThe Law of Supply of Foreign ExchangeOther things remaining the same,the higher the exchange rate,the greater is the quantity of U.S.dollars supplied in the foreign exchange market.The exchange rate influences the quantity of U.S.dollars supplied for two reasons:Imports effect Expected profit effectThe Foreign Exchange Market 2012 Pearson Addison-WesleyImports EffectThe larger the value of U.S.imports,the larger is the quantity of U.S.dollars supplied on the foreign exchange market.The higher the exchange rate,the greater is the value of U.S.imports,so the greater is the quantity of U.S.dollars supplied.The Foreign Exchange Market 2012 Pearson Addison-WesleyExpected Profit EffectFor a given expected future U.S.dollar exchange rate,the lower the current exchange rate,the greater is the expected profit from holding U.S.dollars,and the smaller is the quantity of U.S.dollars supplied on the foreign exchange market.The Foreign Exchange Market 2012 Pearson Addison-WesleySupply Curve for U.S.DollarsFigure 9.2 illustrates the supply curve of U.S.dollars in the foreign exchange market.The Foreign Exchange Market 2012 Pearson Addison-WesleyMarket EquilibriumFigure 9.3 shows how demand and supply in the foreign exchange market determine the exchange rate.The Foreign Exchange Market 2012 Pearson Addison-WesleyIf the exchange rate is too high,a surplus of U.S.dollars drives it down.If the exchange rate is too low,a shortage of U.S.dollars drives it up.The market is pulled(quickly)to the equilibrium exchange rate at which there is neither a shortage nor a surplus.The Foreign Exchange Market 2012 Pearson Addison-WesleyExchange Rate FluctuationsChanges in the Demand for U.S.DollarsA change in any influence on the quantity of U.S.dollars that people plan to buy,other than the exchange rate,brings a change in the demand for U.S.dollars.These other influences areWorld demand for U.S.exportsU.S.interest rate relative to the foreign interest rate The expected future exchange rate 2012 Pearson Addison-WesleyWorld Demand for U.S.ExportsAt a given exchange rate,if world demand for U.S.exports increases,the demand for U.S.dollars increases and the demand curve for U.S.dollars shifts rightward.U.S.Interest Rate Relative to the Foreign Interest RateThe U.S.interest rate minus the foreign interest rate is called the U.S.interest rate differential.If the U.S.interest differential rises,the demand for U.S.dollars increases and the demand curve for U.S.dollars shifts rightward.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyThe Expected Future Exchange RateAt a given current exchange rate,if the expected future exchange rate for U.S.dollars rises,the demand for U.S.dollars increases and the demand curve for dollars shifts rightward.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyFigure 9.4 shows how the demand curve for U.S.dollars shifts in response to changes inU.S.exports The U.S.interest rate differentialThe expected future exchange rateExchange Rate Fluctuations 2012 Pearson Addison-WesleyChanges in the Supply of DollarsA change in any influence on the quantity of U.S.dollars that people plan to sell,other than the exchange rate,brings a change in the supply of dollars.These other influences are U.S.demand for imports U.S.interest rates relative to the foreign interest rate The expected future exchange rate Exchange Rate Fluctuations 2012 Pearson Addison-WesleyU.S.Demand for ImportsAt a given exchange rate,if the U.S.demand for imports increases,the supply of U.S.dollars on the foreign exchange market increases and the supply curve of U.S.dollars shifts rightward.U.S.Interest Rate Relative to the Foreign Interest RateIf the U.S.interest differential rises,the supply for U.S.dollars decreases and the supply curve of U.S.dollars shifts leftward.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyThe Expected Future Exchange RateAt a given current exchange rate,if the expected future exchange rate for U.S.dollars rises,the supply of U.S.dollars decreases and the demand curve for dollars shifts leftward.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyFigure 9.5 shows how the supply curve of U.S.dollars shifts in response to changes in U.S.demand for importsThe U.S.interest rate differentialThe expected future exchange rateExchange Rate Fluctuations 2012 Pearson Addison-WesleyChanges in the Exchange Rate If demand for U.S.dollars increases and supply does not change,the exchange rate rises.If demand for U.S.dollars decreases and supply does not change,the exchange rate falls.If supply of U.S.dollars increases and demand does not change,the exchange rate falls.If supply of U.S.dollars decreases and demand does not change,the exchange rate rises.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyFundamentals,Expectations,and ArbitrageThe exchange rate changes when it is expected to change.But expectations about the exchange rate are driven by deeper forces.Two such forces are Interest rate parity Purchasing power parityExchange Rate Fluctuations 2012 Pearson Addison-WesleyInterest Rate ParityA currency is worth what it can earn.The return on a currency is the interest rate on that currency plus the expected rate of appreciation over a given period.When the rates of returns on two currencies are equal,interest rate parity prevails.Interest rate parity means equal interest rates when exchange rate changes are taken into account.Market forces achieve interest rate parity very quickly.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyPurchasing Power ParityA currency is worth the value of goods and services that it will buy.The quantity of goods and services that one unit of a particular currency will buy differs from the quantity of goods and services that one unit of another currency will buy.When two quantities of money can buy the same quantity of goods and services,the situation is called purchasing power parity,which means equal value of money.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyInstant Exchange Rate ResponseThe exchange rate responds instantly to news about changes in the variables that influence demand and supply in the foreign exchange market.Suppose that the Bank of Japan is considering raising the interest rate next week.With this news,currency traders expect the demand for yen to increase and the demand for dollars to decreasethey expect the U.S.dollar to depreciate.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyBut to benefit from a yen appreciation,yen must be bought and dollars must be sold before the exchange rate changes.Each trader knows that all the other traders share the same information and have similar expectations.Each trader knows that when people begin to sell dollars and buy yen,the exchange rate will change.To transact before the exchange rate changes means transacting right away,as soon as the news is received.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyThe Real Exchange RateThe real exchange rate is the relative price of U.S.-produced goods and services to foreign-produced goods and services.It measures the quantity of real GDP of other countries that a unit of U.S.real GDP buys.The equation that links the nominal exchange rate(E)and real exchange rate(RER)isRER=(E x P)/P*where P is the U.S.price level and P*is the Japanese price level.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyThe Short RunIn the short run,the equation determines RER.RER=(E x P)/P*In the short run,if the nominal exchange rate changes,P and P*do not change and the change in E brings an equivalent change in RER.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyThe Long RunIn the long run,RER is determined by the real forces of demand and supply in the markets for goods and services.So in the long run,E is determined by RER and the price levels.That is,E=RER x(P*/P)A rise in the Japanese price level P*brings an appreciation of the U.S.dollar in the long run.A rise in the U.S.price level P brings a depreciation of the U.S.dollar in the long run.Exchange Rate Fluctuations 2012 Pearson Addison-WesleyExchange Rate PolicyThree possible exchange rate policies are Flexible exchange rate Fixed exchange rate Crawling pegFlexible Exchange RateA flexible exchange rate policy is one that permits the exchange rate to be determined by demand and supply with no direct intervention in the foreign exchange market by the central bank.2012 Pearson Addison-WesleyFixed Exchange RateA fixed exchange rate policy is one that pegs the exchange rate at a value decided by the government or central bank and is achieved by direct intervention in the foreign exchange market to block unregulated forces of demand and supply.A fixed exchange rate requires active intervention in the foreign exchange market.Exchange Rate Policy 2012 Pearson Addison-WesleyExchange Rate PolicyFigure 9.6 shows how the Fed can intervene in the foreign exchange market to keep the exchange rate close to a target rate.Suppose that the target is 100 yen per U.S.dollar.If the demand for U.S.dollars increases,the Fed sells U.S.dollars to increase supply.2012 Pearson Addison-WesleyIf demand for the U.S.dollar decreases,the Fed buys U.S.dollars to decrease supply.Persistent intervention on one side of the foreign exchange market cannot be sustained.Exchange Rate Policy 2012 Pearson Addison-WesleyCrawling PegA crawling peg is an exchange rate that follows a path determined by a decision of the government or the central bank and is achieved by active intervention in the market.China is a country that operates a crawling peg.A crawling peg works like a fixed exchange rate except that the target value changes.The idea behind a crawling peg is to avoid wild swings in the exchange rate that might happen if expectations became volatile and to avoid the problem of running out of reserves,which can happen with a fixed exchange rate.Exchange Rate Policy 2012 Pearson Addison-WesleyFinancing International TradeWeve seen how the exchange rate is determined,but what is the effect of the exchange rate?How does currency appreciation or depreciation influence U.S.international trade?We record international transactions in the balance of payments accounts.2012 Pearson Addison-WesleyFinancing International TradeBalance of Payments AccountsA countrys balance of payments accounts records its international trading,borrowing,and lending.There