andInterestRates(宏观经济学-加州大学-詹姆斯·.pptx

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1、CHAPTER 10Investment, Net Exports, and Interest Rates1Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Questions How are the determinants of investment different in a sticky-price than in a flexible-price model? How are the determinants of net exports different in a sticky-price

2、 than in a flexible-price model? How do changes in interest rates affect the equilibrium level of production and income in a sticky-price model?2Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Questions What is the “IS Curve”?What use is it? What determines the equilibrium leve

3、l of real GDP when the central banks policy is to keep the real interest rate constant?3Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Importance of Investment Changes in investment are the driving force behind the business cyclereductions in investment have played a power

4、ful role in every recession and depressionincreases in investment have spurred every boom4Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Importance of Investment Understanding the causes and consequences of changes in investment will help us to understand business cycles5C

5、opyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.1 - Investment as a Share of Real GDP, 1970-20006Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Role of Investment In the flexible-price model, the real interest rate is a market-clearing pricei

6、t is pushed up or down by supply and demand to equate the flow of savings to the flow of investment7Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Role of Investment In the sticky-price model, the interest rate is not set in the loanable funds marketit is set directly by t

7、he central bank or indirectly by the combination of the stock of money and the liquidity preferences of households and businessesbusinesses match the quantity they produce to aggregate demand automatically creates balance in the financial market8Copyright 2002 by The McGraw-Hill Companies, Inc. All

8、rights reserved.Fluctuations in Investment Fluctuations in investment have two sourceschanges in the real interest rateshifts in investors expectations about future growth, profits, and riskrI-IIr09Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment and theInterest Rate

9、The opportunity cost of an investment project is the real interest ratethe higher the interest rate, the lower the number and value of investment projects that will return more than their current cost and the lower the level of investment spending10Copyright 2002 by The McGraw-Hill Companies, Inc. A

10、ll rights reserved.Investment and theInterest Rate The interest rate that is relevant for determining investment spending is a long-term interest ratewhen considering an investment project, a manager must compare the potential profits of the project to the opportunity to make money from a long-term

11、commitment of the funds elsewhere11Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment and theInterest Rate Long-term and short-term interest rates are different and do not always move in steplong-term interest rates are usually higher than short-term interest ratesthe t

12、erm premium is the premium in the interest rate that the market charges on long-term loans vis-vis short term loans12Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.2 - Bond Yield Curves13Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment

13、 and theInterest Rate The interest rate that is relevant for investment spending decisions is the real interest rate14Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.3 - Gaps between Real and Nominal Interest Rates15Copyright 2002 by The McGraw-Hill Companies, Inc. Al

14、l rights reserved.Investment and theInterest Rate The interest rate that a firm faces is the interest rate charged to risky borrowersthe premium that lenders charge for loans to companies rather than to safe government borrowers is called the risk premium16Copyright 2002 by The McGraw-Hill Companies

15、, Inc. All rights reserved.Figure 10.4 - The Risk Premium: Safe and Risky Interest Rates17Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment and theInterest Rate In the investment function the relevant interest rate (r) is the long-term, real, risky interest rate As r r

16、ises, the level of investment spending will declinerI-IIr018Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.5 - Investment as a Decreasing Function of the Long-Term, Real,Risky Interest Rate19Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Export

17、s and Autonomous Spending Gross exports depend onforeign total incomes (Yf)the real exchange rate () the real exchange rate depends on the domestic real interest rate (r) Like investment, gross exports are affected by changes in the real interest rate20Copyright 2002 by The McGraw-Hill Companies, In

18、c. All rights reserved.Exports and Autonomous Spending A higher interest rate reduces autonomous spending (A) by reducing exports (Xr r) as well as by reducing investment (Ir r)rX-)rXXY(XGr)I-I(CArfrffr00021Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Exports and theInterest

19、 Rate A higher real interest rate reduces gross exportsinvesting in the home country is more attractive foreign exchange speculators shift their portfolio holdings to include more home currency-denominated assetsthe exchange rate falls exports are more expensive to foreigners22Copyright 2002 by The

20、McGraw-Hill Companies, Inc. All rights reserved.Figure 10.6 - From the Real Interest Rate to the Change in Exports23Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Autonomous Spending and the Real Interest Rate A one-percentage-point increase in the real interest rate (r) reduc

21、es autonomous spending by (Ir + Xr)r)X(I-)rXXY(XGICArrfrff00024Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.7 - Autonomous Spending as a Function of the Real Interest Rate25Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Investment-Saving(

22、IS) Curve Because a change in the real interest rate changes autonomous spending, it will change the equilibrium level of real GDPthe effect will be equal to the interest sensitivity of autonomous spending (Ir + Xr) times the multiplier26Copyright 2002 by The McGraw-Hill Companies, Inc. All rights r

23、eserved.The Investment-Saving(IS) Curve The relationship between the level of the real interest rate and the equilibrium level of real GDP is the IS curveIS stands for “Investment-Saving”27Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Investment-Saving(IS) Curve To find a

24、 point on the IS curve:pick a value for the real interest rate and determine the level of autonomous spending at that interest rateuse the income-expenditure diagram to determine the equilibrium level of real GDP Repeat this procedure to find other points on the IS curve28Copyright 2002 by The McGra

25、w-Hill Companies, Inc. All rights reserved.Figure 10.8 - The IS Curve29Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve Define baseline autonomous spending (A0) to include the determinants of autonomous spending that do not depend on the real interest rater)X(I-)rXX

26、Y(XGICArrfrff000)rXXY(XGICAfrff0000r)X(I-AArr030Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve Recall that real GDP is equal to autonomous spending (A) divided by (1-MPE) Substituting, we getMPE-1r)X(I-AYrr0r)IM-t)-(1(C-1)X(I-)IM-t)-(1(C-1)rXXY(XGICYyyrryyfrff0003

27、1Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve The term on the left is the horizontal intercept of the IS curvethe value of equilibrium real GDP if the real interest rate was equal to zero The term on the right is the slope of the IS curvethe responsiveness of re

28、al GDP to changes in the interest rater)IM-t)-(1(C-1)X(I-)IM-t)-(1(C-1)rXXY(XGICYyyrryyfrff00032Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.9 - The IS Curve33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Slope of the IS Curve The first

29、term is the multiplier (1/1-MPE) The second term shows how large a change in investment or exports is generated by a change in the real interest rate)X(I)IM-t)-(1(C-11slope ISrryy34Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Position of the IS Curve The position of the

30、IS curve depends on the baseline level of autonomous spending times the multiplier Changes in any of these determinants will shift the position of the IS curve)IM-t)-(1(C-1)rXXY(XGICMPE-1Ayyfrff000035Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.10 - A Change in Fis

31、cal Policy and the Position of the IS Curve36Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Changes in the Interest Rate To calculate how much a change in the interest rate will shift the equilibrium level of real GDP, you need to know four things:the marginal propensity to sp

32、end (MPE)the interest sensitivity of investment (Ir)the interest sensitivity of the exchange rate (r)the exchange rate sensitivity of exports (X)37Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Moving to the IS Curve If the economy is above the IS curve:real GDP planned expend

33、iture inventories rise firms cut production employment, real GDP, and national income fall If the economy is below the IS curve:planned expenditure real GDP inventories fall firms expand production employment, real GDP, and national income rise38Copyright 2002 by The McGraw-Hill Companies, Inc. All

34、rights reserved.Figure 10.11 - Off of the IS Curve39Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Shifting the IS Curve Two kinds of government policies directly affect the position of the IS curvea shift in tax rates changes both the position and the slope of the IS curvea c

35、hange in the level of government purchases changes the position of the IS curve40Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Shifting the IS Curve Example - an increase in government spendingG = $200 billionMPE = 0.5Ir = $0.11Xr = $0.015r = 4%rMPE-1XI-MPE-1AYrr0trillion $0.

36、400.5-1$0.015$0.11-0.5-10.2$Y41Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Moving along the IS Curve Changes in the real interest rate will move the economy along the IS curvea higher real interest rate will produce a lower level of aggregate demand and equilibrium real GDP

37、a lower real interest rate will produce a higher level of aggregate demand and equilibrium real GDP42Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Moving along the IS Curve Example - cutting interest rates to boost equilibrium real GDP by $500 billionMPE = 0.5Ir = $0.11X = 5%

38、r = $0.003trillion $0.250.5-1$0.003)5($0.11MPE-1XIslope ISrr To boost real GDP by $500 billion, the real interest rate must fall by 2 percentage points43Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.12 - Cutting Target Interest Rates and Raising Real GDP44Copyright

39、2002 by The McGraw-Hill Companies, Inc. All rights reserved.Changing Interest Rates The Federal Reserve controls interest rates through open market operationsbuying and selling short-term government bonds for cash45Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Open Market Ope

40、rations When the Federal Reserve buys government bondsthe total cash in the hands of the public and bank reserves increaseshouseholds, businesses, and banks find that they are holding more money than they would like use the money to buy assets (such as bonds)bond prices rise and interest rates fall4

41、6Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Open Market Operations When the Federal Reserve sells government bondsthe total cash in the hands of the public and bank reserves decreaseshouseholds, businesses, and banks find that they are holding less money than they would li

42、ke try to get money by selling assets (such as bonds)bond prices fall and interest rates rise47Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.13 - Open Market Operations48Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Difficulties Our knowledge

43、 of the structure of the economy is imperfect Even when policies have their expected effects, these effects do not necessarily arrive on schedule The interest rates the Federal Reserve can control are short-term, nominal, safe interest rates49Copyright 2002 by The McGraw-Hill Companies, Inc. All rig

44、hts reserved.The IS Curve of the 1960s In the 1960s, there was a rightward shift in the IS curveincreased optimism on the part of businessesa cut in income taxesextra government expenditures (Vietnam War)50Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.14 - Real GDP

45、and the Interest Rate, 1960-199951Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve of the 1960s In the late 1960s, there was a movement down along the IS curve as real interest rates declinedthe drop in real interest rates was caused (in part) by an increase in infl

46、ation52Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.15 - Shifting Out and Moving along the IS Curve, 1960s53Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve of theLate 1970s From 1977 to 1979, the U.S. economy moved down and to the

47、 right of the IS curvethe expansion toward potential output was accompanied by high and rising inflation In 1979, the Federal Reserve began fighting inflationraised real interest rates from 1979 to 198254Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.16 - Moving alon

48、g the IS Curve, Late 1970s55Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve of the 1980s The 1980s began with a large outward shift in the IS curvean increase in military spendinga cut in income taxesan increase in investor optimism The Federal Reserve responded to

49、 this shift by raising real interest rates56Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.17 - Shifting the IS Curve Out, Early 1980s57Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The IS Curve of the 1980s As inflation remained low through t

50、he mid- and late- 1980s, Federal Reserve policymakers gained confidencebegan reducing real interest rates causing a movement along the IS curve58Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 10.18 - Moving along the IS Curve, Late 1980s59Copyright 2002 by The McGraw-Hi