宏观经济学及财务知识分析(59页PPT).pptx

CHAPTER 13Stabilization Policy1Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.QuestionsWhat principles should guide stabilization policy?What aspects of stabilization policy do economists argue about today?Is monetary policy or fiscal policy more effective as a stabilization policy?How does uncertainty affect the way stabilization policy should be made?2Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.QuestionsHow long are lags associated with stabilization policy?Is it better for stabilization policy to be conducted according to fixed rules or to be conducted by authorities with substantial discretion?3Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Government PolicyThere are two kinds of government policyfiscal policyshifts the IS curvemonetary policyshifts the LM curveThe government uses policy to stabilize the macroeconomy by minimizing the impact of shocks4Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary Policy InstitutionsMonetary policy in the U.S.is made by the Federal Reserve which is the central bankthe principal policy-making body of the Federal Reserve system is the Federal Open Market Committee(FOMC)the FOMC lowers and raises interest rates and increases and decreases the money supply5Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary Policy InstitutionsThe Federal Reserve has a central office and 12 regional officesthe central office is the Board of Governors in Washington,DCthe 12 regional offices are the 12 Federal reserve banks scattered around the U.S.the members of the Board of Governors and the Presidents of the regional Federal Reserve Banks make up the FOMC6Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.1-Structure of the FederalReserve System7Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.2-Composition of the Federal Open Market Committee8Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary Policy InstitutionsThe FOMC meets approximately once a month to set interest ratesemergency meetings can also be scheduled on short noticeWhen the FOMC decides on a policy change,it is implemented immediatelyit takes only minutes for interest rates to shift in response to FOMC actions9Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary Policy InstitutionsThe FOMC changes interest rates by carrying out open-market operationsin an expansionary open-market operation,the Federal Reserve buys government bonds,increasing bank reserves,and lowering interest ratesin a contractionary open-market operation,the Federal Reserve sells government bonds,decreasing bank reserves,and raising interest rates10Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary Policy InstitutionsThe Federal Reserve can also alter interest rates in two other waysthe Board of Governors can alter legally required bank reservesthe Board of Governors can lend money directly to financial institutionsThese tools are used very rarely11Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Fiscal Policy InstitutionsFiscal policy in the U.S.is managed by Congressthe Congress creates the tax laws that determine the amount of taxes imposed by the federal governmentthe Congresss spending bills determine the level of government purchasesTax and spending levels are set through a process called the budget cycle12Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.4-The Budget Process13Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Government ExpendituresMandatory expenditures include spending for Social Security,Medicare,Medicaid,unemployment insurance,and food stampsDiscretionary expenditures must be appropriated each year by Congressthese include defense spending,NASA,highway spending,education spending,and so forth 14Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.5-Major Federal Government Expenditures by Category,1960-200015Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.6-Federal Government Discretionary Spending,Excluding Defense(2000)16Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Fiscal Policy InstitutionsBecause of the way the budget process is set up,making fiscal policy in the U.S.is complicated and time-consumingthe time between when a policy proposal is made and when it becomes effective(the inside lag)can take yearsthe inside lag associated with monetary policy changes can be measured in days or weeks17Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The History of Economic PolicyThe Employment Act of 1946established Congresss Joint Economic Committee and the Presidents Council of Economic Advisorscalled on the President to estimate and forecast the current and future level of economic activity in the U.S.announced that it was the responsibility of the federal government to foster and promote free enterprise and the general welfare18Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The History of Economic PolicyBefore the Great Depression,the general belief was that the government could not stabilize the economy and should not try to do soIt was largely due to the writings of John Maynard Keynes that economists and politicians became convinced that governments could halt depressions and smooth out the business cycle19Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The History of Economic PolicyBecause of the low and stable inflation and unemployment rates of the 1960s,economists and politicians thought that the business cycle was deadHowever,in the 1970s,expected inflation rose and the Phillips curve shifted upthe result was stagflation20Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.7-The U.S.Phillips Curve(s),1955-198021Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The History of Economic PolicyBy the end of the 1970s,many economists were convinced that active monetary policy did more harm than goodthey argued that the U.S.would be better off with an“automatic”monetary policy one idea is to fix the money stock to a stable long-run growth paththe instability of velocity has reduced the number of advocates of this policy22Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.8-The Velocity of Money before 198023Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The Power and Limits of Stabilization PolicyEconomists today have varied views as to how the central bank and fiscal authorities should manage the economysome(such as Milton Friedman)feel that activist attempts to manage the economy are likely to do more harm than goodsome believe that the appropriate government policy can do a lot to stabilize the economy after shocks occur24Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The Power and Limits of Stabilization PolicyEven the most activist of economists recognize the limits of stabilization policystabilization policy requires us to know where the economy is and where it is goinguse large-scale macroeconomic models to forecast the futuresearch for leading indicatorsthe level of the stock market is often used25Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The Lucas CritiqueExpectations of the future affect decision-making in the presentRobert Lucas argued that,because expectations of the future include expectations of government policies,if policies are changed the structure of the economy may change as welleconomic models from the past may not be useful in forecasting the future effects of policy26Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Leading IndicatorsThe index of leading indicators contains ten componentsThe leading indicator that has been most closely watched is the money supplythere are four measures of the money supply(M1,M2,M3,and L)these four monetary aggregates do not behave in the same way27Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.9-Different Measures of the Money Stock Behave Differently28Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The Money MultiplierOpen market operations change the monetary basethe effects on the money supply are less direct and less certainChanges in the monetary base cause changes in the money supply through a process called the money multiplier()29Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The Money MultiplierThe money multiplier can be affected by the the currency-to-deposits ratio that households and businesses keep and the level of excess reserves held by banks(curr/dep)=currency-to-deposits ratio(req/dep)=ratio of required reserves(exc/dep)=excess reserves-to-deposits30Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.10-Changes in the Currency-to-Deposits Ratio31Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Long Lags&Variable EffectsEven with reliable forecasts,changes in policy affect the economy with long lags and have variable effectsChanges in interest rates take time to affect investment,aggregate demand,and real GDPThe level of GDP today is determined by what long-run risky interest rates existed more than a year and a half ago32Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary vs.Fiscal PolicyAt the end of the World War II era,most economists and policy makers believed that the principal stabilization policy tool would be fiscal policyToday,the overwhelming consensus is that monetary policy has proven itself to be faster acting and more reliable than fiscal policy33Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Monetary vs.Fiscal PolicyFiscal policy takes a longer amount of time to workdelays due to the political processThis means that the Federal Reserve can neutralize the effects of any change in fiscal policy on aggregate demandswings in tax laws and appropriations have little effect on real GDP unless the Federal Reserve wishes them to34Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Automatic StabilizersAutomatic stabilizers include tax collections and social transfer programs such as food stamps and unemployment insuranceThese work without new policies having to be created and therefore can moderate the business cycle much more quickly than can discretionary policy35Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.How Monetary Policy WorksMonetary policy takes time to work as wellthe Federal Open Market Committee must first recognize that there is a problem and then formulate a policywhile changes in interest rates will occur almost immediately,it takes over a year for changes in interest rates to change national output and unemployment36Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.How Monetary Policy WorksThe Federal Reserve can either target real interest rates or keep the money stock growing smoothlyif the principal instability in the economy is a shifting IS curve,targeting interest rates will not stabilize the economyif the instability in the economy occurs because money demand is unstable or because the currency-to-deposits and the reserves-to-deposits ratios vary,then targeting interest rates is wiser37Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Rules vs.AuthoritiesShould monetary policy be conducted“automatically”according to rules or should it be left to the discretion of authorities?the first reason for automatic rules is that we fear that the people appointed to authorities will be incompetentthe second reason for fixed rules is that authorities might not have the right objectivespolitical business cycle38Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.11-The Politically-Influenced Business Cycle:Relative Growth in the Second Year of Presidential Terms39Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Central Bank IndependenceResearch has suggested that the more independent a central bank,the better its performancemore independent central banks presided over lower average inflation and less variable inflationcountries with independent banks did not have higher unemployment rates,lower real GDP growth,or larger business cycles40Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 13.12-Inflation and Central Bank Insulation from Politics41Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Credibility&CommitmentIn the short run,pursuing a more expansionary monetary policy can seem to have great benefitshigher real GDP,lower unemployment,little impact on inflationIn the long run,however,a central bank is wiser to keep low inflation as its top prioritykeeps expected inflation low and maintains credibility42Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Credibility&CommitmentEconomists call this conflict between short-run and long-run interests dynamic inconsistencysome economists have argued that this is another reason to have a fixed set of rules for monetary policyothers believe that central banks are concerned with their long-term reputation and will resist the temptation to make inflation and money growth higher than expected43Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Modern Monetary PolicyWhat guidelines for monetary policy should the central bank follow?Economists believe that the central bank should not target real economic variables such as the growth rate of real GDP or the unemployment ratethese are determined in the long run by the growth of potential output and the natural rate of unemploymentPolicies which target nominal variables will work better44Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Modern Monetary PolicyThe Taylor rule provides a policy proposal for the central bankthe central bank chooses a target for the inflation rate and then raises interest rates when inflation is above and lowers interest rates when inflation is below this target45Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Financial CrisesThe Federal Reserve has other important tools that can be used to try to stem depressionsdeposit insurance insulates bank depositors from the effects of financial crisesif a financial crisis is severe enough,the Federal Reserve will act as a lender of last resort46Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Financial CrisesA financial crisis sees investors as a group suddenly become convinced that their investments have become overly riskythey try to exchange their investments for relatively safe,liquid assetsinterest rates spike upwardinvestment can fall sharply sending the economy into a dep