L-. neempoal Tade n a Two- Peod Model Jaek Hník www.jaom-hnk.wbs.z
Wha o Shold Alead now
en aon def... s a esl of expos fallng sho of mpos. s a esl of savngs fallng sho of nvesmens. S A B NX G B B M X B NX A
Neolassal Snhess n hese models, A defs efles maoeonom dseqlbm (eonom oveheang, low foegn demand, loss of pe ompeveness). ( ) q NX q NX q M q X NX δ γ α ) ( Safe level: A def below 5 % of GDP.
Mndell-Flemng Model S NX0 LM Assme pefe apal mobl and fxed ER f BP0 How o smlaneosl aheve nenal and exenal eqlbm?
Mndell-Flemng Model S NX0 LM Assme pefe apal mobl and floang ER f BP0 How o smlaneosl aheve nenal and exenal eqlbm?
Mndell-Flemng Model: Shoomngs Fxed pes (fxed mone sok) No expl mofondaons Do dssson of he eqlbm and welfae sses No expl eamen of expeaons ompaave-sa appoah no fll-fledged dnams. e.g. Donbsh added dnams and expeaons famos ER oveshoong hpohess (see Lee 6)
neempoal Tade n a Two-Peod Model
Assmpons Eonom exss fo wo peods onl wo peods lved hoseholds Sngle adable good (eal ER alwas eqal o ) Pes fll flexble nome of a epesenave hosehold, falls down fom heaven The good s non-soable (no nvesmen) No asses o deb a he begnnng of peod.
Hoseholds opmzaon poblem ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) L L L s MaxU ' ' ' ' 0 ' : ' 0 ' :. λ δ δ λ λ δ δ λ
losed Eonom n eqlbm, a losed eonom ms onsme s nome f <<, eveone wans o boow nees ae jmps p ( ) ( ) ( )
U 00 0 U 0 ln losed Eonom - example ( ) ln( ) ( ).05.05 ( ) ( ) ( ) ln( 00) 6. 69 ln 0 00.05 0.5!!! The dese o smooh onsmpon s ve song, he neven paen of nome dves nees aes nedbl hgh.
Small Open Eonom an boow a wold nees ae Ths helps smooh he onsmpon and nease welfae Deb ms be epad b spls n peod. ( ) ( ) ( ) NX A NX A NX A A
Open Eonom - example U U NX NX 0 ln ( ) ( ln ) ( θ ) ( ) ln ( 53.9) ln( 53.9) A 00 00 53.9 ( ).05 0 53.9 46..05.05.05 43.9!!! A 0 7.78 0.05 46, 00.05 53.9 0.05 43.9 43.9
Open Eonom exended solon Ul fnon wh onsan elas of sbson, b no neessal eqal o ( ) ln( ) onsan and eqal o elas of sbson ( ) θ θ onsan b evenall elas of sbson Elas of sbson θ
Open Eonom exended solon ( ) ( ) ( ) [ ] ( ) [ ] ( )( ) ( ) [ ] ( ) ( ) θ θ θ θ θ θ θ onsmpon depends on lfeme nome mpa of : () sbson effe () /θ () nome effe () - () wealh effe.
Govenmen onsmpon f he govenmen onsmpon s hgh n peod, on boows aboad Govenmen spendng does no ene hoseholds l Radan eqvalene holds. -G MaxU s. ( ) ( ) ( ) G ( G )
Podve Eonom ( ) ( ) ( ) ( ) ( ) ( ), 0 0 0 0 G G F F F F MaxU < >
Podve Eonom ( )[ ] ( ) ( ) ( ) ( ) ( )[ ] ( ) ( ) ( ) ( )( ) ( )( ) ( ) ( ) ( ) ( ) ( ) ( ) 0 ) '( : 0 : ) ( F F U U G F G MaxU F F G G δ δ δ δ
Podve Eonom F( ) F[F( ) ] F( ) B Open eonom an nves moe han a losed one, b a he same me onsme moe n he s peod. A F( )- F( ) F ( ) ( ) ( ) ( )
en Aon Defs ona o he Mndell-Flemng model he ae no evl!!!!!! Help o smooh he onsmpon ove me and hs nease welfae Help o solae pvae onsmpon fom jmps n govenmen spendng Allow he magnal pod of apal o eqalze wold-wde, and hs mpove apal s alloaon and eonom welfae Howeve, as o an gess hs s no he end...