國(guó)際貨幣與金融經(jīng)濟(jì)學(xué)課件15

1、chapter 15:policy coordination, monetary union, and target zonesi. chapter overviewchapter 15 uses the is-lm-bp and aggregate supply-aggregate demand models developed in previous chapters to study the potential incentives and potential drawbacks of international policy coordination. specifically, th

2、e chapter uses "beggar-thy-neighbor" negative policy externalities to motivate an incentive for coordinating monetary and fiscal policies, depending on the nature of the exchange rate regime. the primary potential drawback is a loss of national sovereignty in setting policy objectives. the

3、 chapter also discusses another interesting potential drawback: when credibility is low for discretionary policymakers, the inflation bias for any one country's policymakers can be exacerbated in situations where countries are forced to coordinate their monetary policies.in addition to monetary

4、and fiscal policy coordination, the chapter also discusses the pros and cons of monetary union as it is understood from the theory of optimal currency unions. traditional arguments are first presented based on the assumption that capital is mobile across regions while labor is not, and is subject to

5、 sticky nominal wages. in this case, region specific changes shifts in aggregate demand or supply will lead to labor market adjustment in the case of fixed exchange rates or a single currency, which may result in temporary unemployment. by contrast, under separate currencies, readjustment toward equ

6、ilibrium can occur via a change in the exchange rate, thereby reducing the need for labor market adjustment. in this context, an optimal currency area is defined as a geographical area within which fixed exchange rates may be maintained without slowing regional adjustments to changing regional circu

7、mstances. next the chapter discusses vehicle currencies. it discusses evidence about some inroads the euro has made into the dollars position as the worlds predominant vehicle currency in international money and capital markets.the chapter ends with a discussion of exchange rate target zone systems.

8、 it is argued that these represent a compromise between fixed and floating exchange rates, and consequently an alternative to strict monetary union, in that they can limit exchange rate volatility while still permitting some variation in countries' currency values. the s-curve model of exchange

9、rate targeting is presented, and then critiqued. specifically, the text points out that recent studies have shown that the empirical evidence does not support the idea that real world target zones behave as the pure s-curve model predicts. on the other hand, the text notes that these models may stil

10、l be relevant once they are extended to account for two important real world facts: (1) policymakers that target exchange rates do not typically have complete credibility, and (2) exchange rate interventions typically occur intramarginally before the rate actually hits either the upper or lower targ

11、et band. ii. outlinea. international interdependence1. structural interdependence and international policy externalitiesa. structural interdependence and its consequencesb. international policy externalities2. accounting for interdependence: policy cooperation and coordinationa. international policy

12、 cooperationb. international policy coordinationb. perfect capital mobility revisited: can international policy coordination pay?1. the aggregate demand effects of national monetary policies2. conflicting monetary policies and potential role of policy coordination3. a potential gain from coordinatio

13、nc. pros and cons of international policy coordination1. potential benefits of international policy coordinationa. internalizing international policy externalitiesb. getting the most out of limited sets of policy instrumentsc. gaining support from abroad2. potential drawbacksa. how much autonomy sho

14、uld a nation sacrifice?b. can other countries be trusted?c. putting faith in other nations policymakersd. could “successful” coordination actually be counterproductive?d. the economics of monetary unions1. optimal currency areas2. how separate currencies and a floating exchange rate can be beneficia

15、la. a shift in relative demandsb. a flexible exchange rate3. when could using a single currency pay off?4. rationales for separate currenciesa. lack of fiscal integrationb. removal of currency competitionc. is europe an optimal currency area?e. vehicle currencies1. the dollars predominance2. the eur

16、os impactf. splitting the difference: exchange-rate target zones1. target zonesa. establishing a target zoneb. behavior of the exchange rate inside the target zone2. does the target zone model fit the facts?a. real-world evidenceb. salvaging the target zone theoryg. summaryii. fundamental issues1. w

17、hat is structural interdependence, and how can it lead nations to cooperate or to coordinate their policies?2. what are the potential benefits of international policy coordination?3. what are the potential drawbacks of international policy coordination?4. could nations gain from adopting a common cu

18、rrency?5. what are vehicle currencies?6. what is an exchange-rate target zone?iii. chapter features1. policy notebook: "would the united states have benefited from separate currencies during the great depression?"this notebook discusses an economic historians suggestions about whether the

19、united states might have gained from having separate currencies during the severe economic downturn of the 1930s. his conclusion is that the midwest could have benefited considerably from having its own currency and central bank. for critical analysis: key lessons for emu nations might be that it sh

20、ould strive for greater fiscal cohesiveness, more mobile workforces, and more integrated banking policies. 2. policy notebook: "making euros hazardous to counterfeiters healthor yours?"this notebook examines issues relating to hand-to-hand circulation of euros in emu nations. problems with

21、 euro notes have included counterfeiting, which the ecb is trying to deter by embedding radio-frequency identification (rfid) chips into the fabric of the largest-denomination euro notes, and the relative flimsiness of the notes, which tend to wear out relatively quickly. in addition, the alloys in

22、euro coins emit ion emissions that contribute to hand eczema.for critical analysis: counterfeiting of large-denomination notes creates the largest social losses, so it is more likely to be worth the ecbs expense to imbed rfid chips in these notes.iv. answers to end of chapter questions1. this would

23、be a situation of policy coordination, because the nations would actively be working together to establish a common payment mechanism and regulatory framework that would apply simultaneously to both countries' banking systems.2. this is an example of a negative policy externality because the dom

24、estic tax cut tends to stimulate domestic real-income growth at the expense of lower real-income growth in the other country. as a result, the domestic tax cut has a beggar-thy-neighbor effect on the other nation.3. according to the optimal-currency-area theory, these three economies are good candid

25、ates for a single currency. if events were to affect the sub-regions differently, causing payment imbalances among the sub-regions, then the residents, who share a common culture and language and are highly mobile, could adjust by moving as desired among the regions. hence, exchange-rate adjustments

26、 are not necessary to cushion the sub-regions in the face of such imbalances. adopting a single currency would permit them to avoid the sizable currency-conversion costs that they currently face. 4. one economic argument they might give relates to the standard case for a fixed exchange rate: it save

27、s households and firms the costs of hedging against risks of exchange-rate fluctuation, which definitely cannot occur under a common currency. indeed, with a common currency there also is no risk of currency realignments that can take place under fixed exchange rates among multiple currencies. anoth

28、er argument is that adopting a common currency provides a basis for lower european-wide inflation if the european central bank achieves greater monetary policy credibility relative to the current central banking institutions of europe. finally, moving to a common monetary policy might help engender

29、greater coordination of fiscal, banking, and trade policies among the participating nations.5. the language barrier combines with the other legal and natural barriers for factor movement and serves as an impediment to labor mobility. in this case, the country could benefit from adopting a flexible e

30、xchange rate. if a flexible exchange rate were in effect, the increased trade deficit would lead to a natural depreciation of the nation's currency. this would help to stabilize aggregate demand (i.e., reduce its fall) by making imports more expensive and exports less expensive. maintaining a fi

31、xed exchange rate eliminates this stabilizing channel.6. the single currency in europe would work even better in europe if there existed a single common language because the common language would make it easier for labor to be mobile; a key assumption to the theory behind an optimal currency area.7.

32、 potential benefits of national coordination of monetary policies include the internalization of policy externalities, the optimization of the outcome of the limited set of policy instruments, the benefit of external commitments when faced with internal pressures to follow short-term goals at the ex

33、pense of long term stability. answers will vary as to which one is considered the most important.8. potential disadvantages of monetary policy coordination include the sovereignty an individual country sacrifices, the potential of one country to "cheat" on another by deviating from the agr

34、eed upon coordination strategy, the potential of poor policy making by a member country, and the added potential of inflation bias when credibility levels are low within individual nations. answers will vary regarding which is the greatest sacrifice. 9. in light of these trade-offs, countries may ag

35、ree to only intermittently coordinate policies when the countries involved are similarly affected by an exogenous shock (e.g., an energy price increase). in such a situation, the countries are recovering from a common shock, and share similar policy goals. thus, they can make the most of the advanta

36、ges of policy coordination while at the same time minimizing the disadvantages of policy coordination. 10. in this situation, the central bank would lack credibility to defend the target zone, so the exchange rate could no longer lie on the s-curve. instead, the currencys value would float, so it wo

37、uld lie on the straight line associated with a free float.v. multiple choice questions1. structural interdependence is defined as thea. relationship between fiscal and monetary policies when the central bank is not fully independent.b. link between a short-term increase in cyclical unemployment and

38、a gradual increase in structural unemployment.c. relationship between a country's wage-setting institutional structure and the slope of the aggregate supply schedule.d. interconnectedness of countries' markets, which causes events in one nations economy to affect the economy of another natio

39、n. answer: d2. which of the following is an example of an international policy externality?a. sterilization.b. the locomotive effectc. central bank independenced. the balance-of-payments schedule answer: b3. the group of seven is a group of countries that have agreed to engage in a. a monetary union

40、.b. a fixed exchange rate regime.c. international policy cooperation.d. a shared independent central bank. answer: c4. the basle agreement, which established common risk-based capital adequacy standards for private banking institutions, is an example ofa. international policy coordination.b. central

41、 bank independence.c. a monetary policy rule.d. high capital mobility. answer: a5. in a two-country model with perfect capital mobility and a floating exchange rate, an increase in the domestic stock of moneya. creates a positive policy externality for the foreign country.b. induces an increase in f

42、oreign income.c. induces a decrease in foreign income.d. induces no change in foreign income. answer: c6. in a two-country model with perfect capital mobility and a floating exchange rate, a decrease in the foreign money stock leads to a a. capital inflow into the domestic economy, an appreciation o

43、f the domestic exchange rate, and a reduction in domestic aggregate demand.b. capital inflow into the domestic economy, a depreciation of the domestic exchange rate, and a reduction in domestic aggregate demand.c. capital outflow from the domestic economy, a depreciation of the domestic exchange rat

44、e, and an increase in domestic aggregate demand.d. capital outflow from the domestic economy, an appreciation of the domestic exchange rate, and an increase in aggregate demand. answer: c7. in the two-country model with perfect capital mobility and a floating exchange rate, each central bank has an

45、incentive to raise the stock of money, raising output in the domestic economy at the expense of the foreign economy. this is an example ofa. an optimal currency area.b. international policy cooperation.c. international policy coordination.d. a conflict in monetary policymaking. answer: d8. which of

46、these is not a benefit of international policy coordination?a. reducing national sovereigntyb. internalizing international policy externalitiesc. gaining support from abroad domestic policy actionsd. achieving multiple objectives with a limited number of policy instruments answer: a9. kenneth rogoff

47、 suggests a way in which "successful" monetary policy coordination may reduce joint economic welfare. in this model, the reduction in welfare occurs becausea. coordination increases capital mobility.b. the commitment to maintain the exchange rate is not credible.c. coordination produces a

48、larger inflation bias in each economy.d. the coordination effort necessitates offsetting contractionary fiscal policy. answer: c10. a monetary union is a. a geographic region in which labor is not sufficiently mobile to offset asymmetric shocks to aggregate demand.b. a range of exchange rates in whi

49、ch the central bank allows the nominal value of the currency to float.c. an informal international agreement to fix nominal exchange rates.d. a set of countries that choose to use a common currency. answer: d11. an optimal currency area isa. a range of exchange rates within which the central bank al

50、lows the exchange rate to float, while at the same time preventing the exchange rate from moving outside that range.b. a geographic region in which welfare is greater when the respective governments fix the exchange rate or adopt a common currency.c. the quantity of the nominal stock of money that i

51、s consistent with the highest level of domestic welfare.d. a geographic region in which there are no barriers to trade between countries in the region. answer: b12. the primary benefit of separate currencies and a floating exchange rate, relative to a monetary union, is that a. exchange rate movemen

52、ts generate automatically stabilizing expenditure adjustments in the face of asymmetric shocks.b. firms need not hedge the risks associated with currency movements in the face of asymmetric shocks.c. there are lower transactions costs in international trade.d. monetary policy coordination is easier.

53、 answer: a13. under a monetary union, adjustment to relative price shocks between regions takes place througha. coordinated monetary policy.b. nominal exchange rate movements.c. the movement of labor among regions of the union.d. nonsterilized monetary expansion in the region that experienced the ne

54、gative demand shock. answer: c14. which one of the following is an advantage of a monetary union, as compared to separate, floating currencies?a. relative price movements between regions that allow the real wage to adjust, even when the nominal wage is stickyb. lower transaction costs in internation

55、al tradec. domestic control of seignorage revenuesd. currency competition answer: b15. arguments against the european monetary union include all of the following except thata. it would reduce currency conversion costs.b. it limits the fiscal autonomy of national governments.c. labor mobility within

56、europe is too low to be consistent with such a union.d. some nations have specific sentimental or historical ties to their respective currencies. answer: a16. the budgetary criteria for admission to the european monetary union require each entrant to havea. an independent central bank.b. a balanced

57、budget and low inflation.c. a per capita gdp of at least $20,000.d. government debt of less than 60 percent of gdp and a government budget deficit of less than 3 percent of gdp. answer: d17. the currency that individuals and businesses most often use to conduct international transactions is called thea. domestic currency.b. vehicle currency.c. unit of exchange.d. euro. a