北大金融学课件(英文版)第9章(3课时).ppt

CHAPTER 9 Internal and External Balance with Fixed Exchange Rates Fixed Rate and Macro Economy Divergences between the IS-LM intersection and the FE curve call for official intervention Official intervention causes OR transactions The official settlements balance is not zero Creates pressures for internal adjustments. Official Intervention Intervention vs. monetary policy Intervention changes Ms, and tends to reduce the imbalance Intervention limits the independence of monetary policy External vs. Internal Balance Pursue external balance, letting inflation or unemployment get out of control? Focus on internal balance while allowing deficit or surplus widened? Two possible solutions How intervention influences Ms? How intervention influences Ms? How intervention influences Ms? Figure 9.2 Figure 9.3 Figure 9.3 Is Intervention Favorable? External imbalance official intervention Ms changes the economy moves back to external balance. This adjustment may be undesirable, as Independence of monetary policy is harmed The adjustment may conflict with domestic goals. Sterilization Sterilization can be used to offset the changes in Ms, but it has its limit. Independent Monetary Policy with Fixed Rates ? If a country begins with a deficit, the defense of the fixed rate forces it to contract its Ms If it begins with a surplus, the defense forces it to expand its Ms Even if the country begins with a payments balance, its ability to pursue an independent monetary policy is constrained. Independent Monetary Policy with Fixed Rates ? Expansionary monetary policy shifts LM down The balance of payments turns into deficit Official intervention increases Ms LM shifts back Independent Monetary Policy with Fixed Rates ? A fixed exchange rate and its defense constrain a country’s ability to pursue an independent monetary policy. The Impossible Trinity A nation can’t have simultaneously : Free capital mobility Independent monetary policy Fixed exchange rate A nation