巴罗 宏观经济学 ppt 18

Chapter18 Exchange Rates
Macroeconomics
Chapter 18
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Different Currencies and Exchange Rates
Each country issues and uses its own currency, instead of using a common currency. To keep things simple, pretend that there are only two countries. Think of the home country as the United States and the foreign country as China. The China nominal quantity of money, Mf, is measured in RMB. The U.S. nominal quantity of money, M, is in Dollars.
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Purchasing-Power Parity
The Relative PPP Condition
The PPP condition says that the nominal exchange rate, ε, equals the price ratio, Pf/P ε = Pf/ P real exchange rate= ε/(Pf/P)
dollars received in year t+ 1 = 1 + i
Option 2: Use exchange market and hold Chinese bond
dollars received in year t+ 1 = εt·(1+if)/εt+1
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Purchasing-Power Parity
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Purchasing-Power Parity
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Purchasing-Power Parity
Macroeconomics
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Purchasing-Power Parity
The PPP Condition and the Real Exchange Rate
real exchange rate= (ε/ Pf) / (1/P) real exchange rate is the ratio of goods that can be bought in China (say, with $1) to goods that can be bought in the United States (also with $1).
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Example: Chinese Yuan
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Interest-Rate Parity
In terms as expected rates of change: ∆(εt/εt)e= (πf)e−πe if − i = (πf)e−πe interest-rate differential = difference in expected inflation rates if − (πf)e= i− πe foreign expected real interest rate = home expected real interest rate
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Purchasing-Power Parity
The PPP Condition and the Real Exchange Rate
purchasing-power parity (PPP). This condition means that the purchasing power in terms of goods for dollars (or RMB) is the same regardless of whether households buy goods in the United States or China.
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Purchasing-Power Parity
The Relative PPP Condition
growth rate of Pf/P = ∆Pf/Pf − ∆P/P growth rate of Pf/P = πf − π growth rate of real exchange rate = ∆ε/ε − (πf − π )
Macroeconomics Chapter 18 2
Different Currencies and Exchange Rates
Exchange market, on which participants trade the currency of one country for that of another. the nominal exchange rate is the number of RMBs received for each dollar. Let ε denote the nominal exchange rate between RMBs and dollars.
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Interest-Rate Parity
1+if = (1+ i) · (εt+1/εt ) The growth rate of the nominal exchange rate is
∆εt/εt = (ε t+1− ε t)/εt ∆εt/εt = (ε t+1/εt )− 1 1 + i f = (1 + i)·(1 + ∆εt/ε t)
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Purchasing-Power Parity
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Purchasing-Power Parity
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Interest-Rate Parity
Option 1: Hold U.S. bond
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Purchasing-Power Parity
The PPP Condition and the Real Exchange Rate
The U.S. price level, P, is measured in dollars per unit of goods. We denote the Chinese price level (or foreign price level) by Pf , measured in RMB per unit of goods. Assume that the goods produced and used in both countries are physically identical. We also ignore any transportation or other transaction costs for buying and selling goods in the two countries.
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Different Currencies and Exchange Rates
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Different Currencies and Exchange Rates
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Interest-Rate Parity
1+i =εt·(1+if)/εt+1
return on holding U.S. bond = return on using exchange market and holding Chinese bond
Macroeconomics
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Macroeconomics
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Interest-Rate Parity
Macroeconomics
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Purchasing-Power Parity
The Relative PPP Condition
purchasing-power parity, relative form:
∆ε/ε = πf − π
growth rate of nominal exchange rate = foreign inflation rate− home inflation rate