国际经济学第九版英文课后答案第20单元

国际经济学第九版英⽂课后答案第20单元
CHAPTER 20
FLEXIBLE VERSUS FIXED EXCHANGE RATES, THE EUROPEAN MONETARY SYSTEM, AND MACROECONOMIC POLICY COORDINATION OUTLINE
20.1 Introduction
20.2 The Case for Flexible Exchange Rates
20.2a Market Efficiency
20.2b Policy Advantages
20.3 The Case for Fixed Exchange Rates
20.3a Less Uncertainty
20.3b Stabilizing Speculation
20.3c Price Discipline
Case Study 20-1: Macroeconomic Performance Under Fixed and Flexible Rates Regimes
20.4 Optimum Currency Areas and the European Monetary System
20.4a Optimum Currency Areas
20.4b European Monetary System
Case Study 20-2: The 1992-3 Currency Crisis in the European Monetary System
20.4c Transition to Monetary Union
Case Study 20-3: Maastricht Convergence Indicators
20.4d Creation of the Euro
Case Study 20-4: Benefits and Costs of the Euro
20.4e European Central Bank and Common Monetary Policy
20.5 Exchange Rate Bands, Adjustable Pegs, Crawling Pegs, and Managed Floating
20.5a Exchange Rate Bands
20.5b Adjustable Peg Systems
20.5c Crawling Pegs
20.5d Managed Floating
Case Study 20-5: Exchange Rate Arrangements of IMF Members
20.6International Macroeconomic Policy Coordination
Appendix: Exchange Rate Arrangements
Key Terms
Freely floating exchange rate system European Monetary Union Optimum currency area or block Euro
European Monetary System (EMS) European Central Bank (ECB)
European Currency Unit (ECU) Adjustable peg system
European Monetary Cooperation Fund (EMCF) Crawling peg system
Exchange Rate Mechanism (ERM) European Monetary Institute (EMI) Leaning against the wind Dirty floating
Managed floating exchange rate system Maastricht Treaty
International macro policy coordination Growth and Stability Pact (GSP) Lecture Guide:
1. This chapter (not a core chapter) brings together for the most part material
scattered throughout previous chapters on the question of fixed versus flexible
exchange rates. But it also examines the European Monetary System and
international macroeconomic cooperation. It is an important chapter but
because of the time constraint, I would omit it in a one-semester undergraduate
course in international economics, except for section 20.4 on the European Union and the short section on international macroeconomic policy coordination.
2. If I were to cover this chapter, I would cover sections 1 to 3 in the first lecture,
section 4 in the second lecture, and sections 5 and 6 in the third lecture and
assigning the end of chapter problems.
Answers to Problems:
1. a. The U.S. will export the commodity because at R=2, P=$7 in the U.S. and P=$8
in the U.K.
b. The U.S. has a comparative disadvantage in this commodity at the equilibrium
exchange rate.
2. Under a fixed exchange rate system and perfectly elastic international capital
flows, the attempt on the part of the nation to reduce its money supply (tight
monetary policy) tends to increase interest rates in the nation and attract capital
inflows. This frustrates the attempt on the part of the nation's monetary authorities to reduce the nation's money supply. On the other hand, the attempt of the nation's monetary authorities to increase the money supply of the nation will be frustrated by the tendency of the nation's interest rate to fall, resulting in a capital outflow
that would leave the nation's money supply unchanged (see section 17.4c).
3. See Figure 1.
Figure 1 shows that for a shift in the supply of pounds from S to S' and S*, the
exchange rate fluctuate more when the demand curve for pounds is more inelastic (D*) then when it is more elastic (D).
4. See Figure 2.
Curve A shows the fluctuation in the exchange rate over the business cycle
without speculation; curve B shows the fluctuation in the exchange over the
business cycle with stabilizing speculation, while curve C shows the fluctuation in the exchange rate over the business cycle with destabilizing speculation.
5. See Figure 3 on the previous page.
6. An optimum currency area involves permanently fixed exchange rates as well as
common monetary and fiscal policies among its members. Thus, an optimum
currency area resemble a single economic entity and monetary union. There are
no such implications for countries which are connected only by fixed exchange
rates.
7. (a) With a single central bank and currency the member nations of the European
Union can no longer print money and thus each member no longer has the
wherewithal to conduct monetary policy. The original central bank of each
member nation now assumes functions similar to that of the federal reserve banks in the Federal Reserve System in the United States. That is, they affect the
community-wide monetary policy only through their participation in central bank deliberations and decisions.
(b) With a single currency, of course, there are no such things and exchange rates
among the member nations' currencies, just as there are no exchange rates for the dollar among the states of the United States. Or better, the exchange rate is
permanently fixed at 1:1.
8. The benefits that the EU would get from establishing a single currency are:
eliminating the costs involved in exchanging currencies, eliminating the risk of
exchange fluctuations and currency crises, inducing nations to adopt more
appropriate economic policies and being able, as a community, to withstand better external shocks. The costs results from the inability of nations to change their
exchange rate and to tailor monetary and fiscal policies to their specific national
needs.
9. See Figure 4.
10. See the dashed curve in Figure 5.
11. It is true that flexible exchange rates tend to insulate the economy from
international disturbances. For example, the tendency of a nation to follow
inflationary policies will result in a depreciation of its currency. This means that
the trade partner's currency will appreciate, making its imports cheaper and thus
preventing the importation of inflation from abroad.
In an integrated world capital market, however, inflationary policies by one nation will lower its interest rates in the nation and will lead to capital outflows. Unless the trade partner is able to continuously sterilize these capital inflows, inflationary pressures will spread to it also. These inflationary pressures can be avoided by
international policy coordination. Thus, international policy coordination is useful also under a flexible exchange rate system because in a world of unrestricted
international capital flows flexible exchange rate do not insulate nations completely from their partner's policies.
12. Game theory is a method for examining the effect of a given policy or course of
action on a nation or other economic unit for each possible response by another
nation or other economic unit. Game theory can thus be used to show that a
cooperative equilibrium can be better for (i.e., can increase the welfare of) each
nation or economic unit than if each tries to maximize its welfare independently.
13. In a noncooperative equilibrium, each nation is likely to follow a loose fiscal
policy but a tight monetary policy in order to keep its interest rates up and thereby attract foreign capital and keep the international value of its currency high, so as
to keep import prices low. However, when all nations do this their efforts will be self-defeating and interest rates will be higher than with a cooperative
equilibrium. High interest rates will reduce long-term growth for all nations. With
a cooperative equilibrium, on the other hand, nations will use restrictive fiscal and
easy monetary policies. This will keep interest rates low and thus stimulate long-
run growth.
14. (a) There have been four episodes of significant international macroeconomic policy
coordination among the leading industrial nations during the past three decades.
The first occurred in 1978 when Germany was induced to stimulate its economy
and play as "locomotive" and stimulate growth in other leading industrial
countries also. The effort ended when Germany, fearing inflation, stooped
stimulating its economy. The second was the Plaza Agreement in September of
1985 when the United States, Japan, Germany, France, and the United Kingdom
met at the Plaza Hotel in New York to engineer a "soft landing" for the
overvalued dollar. This effort was regarded as successful but the markets were
already lowering the value of the dollar. The third case is represented by the
Louvre Accord in February 1987, when the leading industrial nations agreed on
implicit target zones for the exchange rates among the leading currencies. This
agreement, however, became inoperative soon after it was reached. The fourth
case is evidenced by the coordinated quick monetary response on the part of the
United States, Germany, and Japan to October 1987 worldwide equity-market
crash.
(b) International macroeconomic policy coordination to date has been episodic and
limited in scope and it is unlikely that it will be very different in the future. App. On Janaury 1, 1999, 11 of the 15 members of the European Union adopted the euro as their common currency. Britain, Sweden, and Denmark decided not to
join from the start, but retained the option to join later. Greece was not admitted
because of its inability to meet most of the Maastricht criteria. The likelyhood,
however, is that all four will join the euro by July 2002, when the euro is to
completely replace the currencies of the participating nations. In the meantime, a new exchange rate mechanism, the ERM II, was installed to keep the currencies
of these four countries from fluctuating to widely, in
anticipation of their joining the euro.
Multiple-choice Questions:
1. An alleged advantage of flexible over fixed exchange rates is:
*a. market efficiency
b. stabilizing speculation
c. price discipline
d. all of the above
2. Flexible exchange rates:
a. enhance the effectiveness of fiscal policy
b. reduce the effectiveness of fiscal policy
*c. enhance the effectiveness of monetary policy
d. reduce the effectiveness of monetary policy
3. Under a flexible as compared to a fixed exchange rate system:
*a. a nation can more easily achieve its desired inflation-unemployment tradeoff
b. it is more difficult for a nation to achieve its desired inflation-unemployment tradeoff
c. it is more difficult for a nation to achieve internal balance
d. it is more difficult for a nation to achieve external balance
4. Everything else being the same, the volume of trade is likely to be:
a. larger under a flexible than under a fixed exchange rate system
*b. larger under a fixed than under a flexible exchange rate system
c. equal under a flexible and fixed exchange rate system
d. any of the above
5. Most economists believe that under "normal conditions" speculation:
*a. is stabilizing
b. is destabilizing
c. is neither stabilizing nor destabilizing
d. seldom occurs
6. Price discipline is:
*a. greater under a fixed than under a flexible exchange rate system
b. greater under a flexible than under a fixed exchange rate system
c. about the same under a fixed as under a flexible exchange rate system
d. is unrelated to the type of exchange rate system
7. Which of the following statements is correct with respect to flexible exchange rates?
a. they insulate the domestic economy from external shocks much more than fixed exchange rates
b. they are particularly attractive to nations subject to large external shocks
c. they provide less stability to an open economy subject to large internal shocks
*d. all of the above
8. The formation of an optimum currency area is more likely to be beneficial:
a. the smaller is the mobility of resource among the various nations of the optimum currency area
b. the smaller are the structural similarities of member nations
*c. the more willing are member nations to closely coordinate their fiscal, monetary, and other policies
d. all of the above
9. The European Monetary System is or resembles a:
*a. fixed exchange rate system
b. a managed exchange rate system
c. a crawling peg system
d. a freely flexible exchange rate system
10. The European Monetary Union:
a. has a common currency
b. has a single central bank
c. conducts a common monetary policy
*d. all of the above
11. If the band of allowed fluctuation under a fixed exchange rate system is made very wide, the system will resemble:
*a. a flexible exchange rate system
b. the gold standard
c. an adjustable peg
d. a crawling peg
12. A fixed exchange rate system without a band of allowed fluctuation would require the nation's monetary authorities to intervene in the foreign exchange market:
a. never
b. seldom
*c. constantly
d. we cannot say
13. The policy of changing par values by small preannounced amounts at frequent intervals until the equilibrium exchange rate is reached is called:
*a. crawling peg
b. adjustable peg
c. managed float
d. dirty float
14. The policy of intervention in the foreign exchange market to smooth out short-run fluctuations in exchange rates is called:
a. crawling peg
b. adjustable peg
*c. leaning against the wind
d. managed float
15. International macroeconomic policy coordination has become more useful and essential in recent decades because:
a. the interdependence among countries has increased
b. the volume of trade has grown more rapidly than GNP
c. of the large increase in international capital flows
*d. all of the above。