【PPT精品课件】货币金融学7版英文课件--18-大学课件2

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18-7
Stability in Foreign Exchange
Markets
E euro $
• The value of the $ has become a major consideration for the Bank of Canada. An in E makes Canadian industries less competitive with those abroad and a in E stimulates inflation in Canada.
Hence, policies can be specifically aimed at promoting economic growth by directly encouraging firms to invest or by encouraging people to save, which provides more funds for firms to invest. In fact, this is the stated purpose of so-called supply-side economic policies, which provide tax incentives for firms to invest more and for people to save more.
• A central bank may also want to reduce upward movements in interest rates because such movements generate hostility toward central banks and lead to demands that their independence and power should be reduced (see Chapter 14).
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18-4
Price Stability
In recent years policymakers have become increasingly aware of the social and economic costs of inflation and more concerned with a stable P as a goal of economic policy. In fact, P stability is viewed as the most important goal for monetary policy because 1. inflation creates uncertainty that may hamper growth 2. inflation makes it hard to plan for the future 3. inflation may strain a country’s social fabric (by creating conflicts between different groups) 4. extreme inflation, known as hyperinflation, leads to slower growth as for example in Argentina, Brazil, and Russia in the recent past.
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18-3
Economic Growth
The goal of steady economic growth is closely related to the goal of low u because businesses are more likely to invest in physical capital to productivity and growth when u is low. If u is high and factories are idle, it does not pay for firms to invest in additional physical capital.
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18-5
Interest-Rate Stability
• Interest-rate stability is desirable because fluctuations in interest rates can create uncertainty and make it harder (for both firms and households) to plan for the future.
• The conflict among goals may thus present central banks with some hard choices!
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18-9
Central Bank Strategy
© 2005 Pearson Education Canada Inc.
© 2005 Pearson Education Canada Inc.
18-6
Stability of Financial Markets
• Financial crises can interfere with the ability of financial markets to channel funds from surplus spending units to deficit spending units, thereby leading to a sharp contraction in economic activity.
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18-2
High Employment
High employment is a worthy goal for two reasons:
1. The alternative situation, high unemployment, causes much human misery, with people suffering financial distress, loss of personal self-respect, and in crime.
Chapter 18
Conduct of Monetary olicy: Goals and Targets
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Goals of Monetary Policy
Goals
1. High Employment 2. Economic Growth 3. Price Stability 4. Interest Rate Stability 5. Financial Market Stability 6. Foreign Exchange Market Stability Goals often in conflict
© 2005 Pearson Education Canada Inc.
18-8
Conflict Among Goals
• Many of the goals mentioned are consistent with each other as, for example,
• high employment with economic growth, and
• Also preventing large changes in E makes it easier for firms and people involved in international trade to plan ahead.
• Stabilizing extreme movements in E in FX markets is thus viewed as a worthy goal of monetary policy. In fact, in countries which are even more dependent on foreign trade, stability in FX markets takes on even greater importance.
• The promotion of a more stable financial system in which financial crises are avoided is thus an important goal for a central bank.
• The stability of financial markets is also fostered by i stability because fluctuations in i create uncertainty for financial firms, affecting both their profits as well as their net worth.
2. When u is high, the economy has not only idle workers but also idle resources, resulting in a lower GDP.
But how low should u be? Because frictional unemployment (which involves searches by workers and firms to find suitable matchups) is desirable, and because policy can do little about structural unemployment (due to a mismatch between job requirements and the skills of workers), the goal of high employment should seek not u = 0 but u > 0 consistent with full employment (at which the demand for labor equals the supply of labor). This level of u is called the natural rate of unemployment.