国际金融第3章.Money
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Interest rate, R Real money supply
Real money supply increase
R1 R2
1 2 L(R,Y1)
M1 P
M2 P
Real money holdings
18
• 4.3Output and the Interest Rate
– An increase (fall) in real output raises (lowers) the interest rate, given the price level and the money supply.
3
Introduction
• Factors that affect a country’s money supply or demand are among the most powerful determinants of its currency’s exchange rate against foreign currencies. • This chapter combines the foreign-exchange market with the money market to determine the exchange rate in the short run.
Chapter 3 Money, Interest Rates, and Exchange Rates
Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy Sixth Edition Policy, by Paul R. Krugman and Maurice Obstfeld
Q2
MS ( = Q 1 ) P
Q3
Real money holdings
16
• 4.2 Interest Rates and the Money Supply
– An increase (fall) in the money supply lowers (raises) the interest rate, given the price level and output.
Ms/P = L(R,Y) (3-4)
15
Figure 3-3: Determination of the Equilibrium Interest Rate
Interest rate, R Real money supply 2
R2
R1 R3
1 3
Aggregate real money demand, L(R,Y)
– Changes in the risk of holding money need not cause individuals to reduce their demand for money.
• Any change in the riskiness of money causes an equal change in the riskiness of bonds.
5
• 1.4What Is Money?
– Assets widely used and accepted as a means of payment. – Money is very liquid, but pays little or no return.
• All other assets are less liquid but pay higher return.
Exchange Rate in the Short Run
• Short run analysis
– A generally accepted means of payment
• 1.2Money as a Unit of Account
– A widely recognized measure of value
• 1.3Money as a Store of Value
– A transfer of purchasing power from the present into the future
Chapter Organization
• • • • • Introduction Money Defined: A Brief Review The Demand for Money by Individuals Aggregate Money Demand The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
Interest rate, R Real money supply Increase in real income R2 R1 2 1 1' L(R,Y2) L(R,Y1) MS ( = Q 1 ) P Q2 Real money holdings
20
§5The Money Supply and the
7
§2 The Demand for Money by Individuals
• Three factors influence money demand:
– Expected return – Risk – Liquidity
• 2.1Expected Return
– The interest rate measures the opportunity cost of holding money rather than interestbearing bonds.
• Figure 3-5 shows the effect on the interest rate of a rise in the level of output, given the money supply and the price level.
19
Figure 3-5: Effect on the Interest Rate of a Rise in Real Income
• The effect of increasing the money supply at a given price level is illustrated in Figure 3-4.
17
Figure 3-4: Effect of an Increase in the Money Supply on the Interest Rate
2
Chapter Organization
• The Money Supply and the Exchange Rate in the Short Run • Money, the Price Level, and the Exchange Rate in the Long Run • Summary
9
• 2.3 Liquidity
– The main benefit of holdwenku.baidu.comng money comes from its liquidity.
• Households and firms hold money because it is the easiest way of financing their everyday purchases.
11
– The aggregate demand for money can be expressed by:
Md = P x L(R,Y) (3-1) where: P is the price level Y is real national income L(R,Y) is the aggregate real money demand
– It analyzes the long-term effects of monetary changes on output prices and expected future exchange rates.
4
§1Money Defined: A Brief Review
• 1.1Money as a Medium of Exchange
– Money Supply (Ms) Ms = Currency + Checkable Deposits
6
• 1.5How the Money Supply Is Determined
– An economy’s money supply is controlled by its central bank. • The central bank: –Directly regulates the amount of currency in existence –Indirectly controls the amount of checking deposits issued by private banks
14
§4The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
• 4.1 Equilibrium in the Money Market
– The condition for equilibrium in the money market is: Ms = Md (3-3) – The money market equilibrium condition can be expressed in terms of aggregate real money demand as:
– A rise in the average value of transactions carried out by a household or firm causes its demand for money to rise.
10
§3 Aggregate Money Demand
• 3.1Aggregate money demand
– The total demand for money by all households and firms in the economy. – 3.2 It is determined by three main factors:
• Interest rate –It reduces the demand for money. • Price level –It raises the demand for money. • Real national income –It raises the demand for money.
13
Figure 3-2: Effect on the Aggregate Real Money Demand Schedule of a Rise in Real Income
Interest rate, R
Increase in real income
L(R,Y2) L(R,Y1) Aggregate real money demand
• A rise in the interest rate raises the cost of holding money and causes money demand to fall.
8
• 2.2Risk
– Holding money is risky.
• An unexpected increase in the prices of goods and services could reduce the value of money in terms of the commodities consumed.
• Equation (14-1) can also be written as:
Md/P = L(R,Y) (3-2)
12
Figure 3-1: Aggregate Real Money Demand and the Interest Rate
Interest rate, R
L(R,Y)
Aggregate real money demand
Real money supply increase
R1 R2
1 2 L(R,Y1)
M1 P
M2 P
Real money holdings
18
• 4.3Output and the Interest Rate
– An increase (fall) in real output raises (lowers) the interest rate, given the price level and the money supply.
3
Introduction
• Factors that affect a country’s money supply or demand are among the most powerful determinants of its currency’s exchange rate against foreign currencies. • This chapter combines the foreign-exchange market with the money market to determine the exchange rate in the short run.
Chapter 3 Money, Interest Rates, and Exchange Rates
Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy Sixth Edition Policy, by Paul R. Krugman and Maurice Obstfeld
Q2
MS ( = Q 1 ) P
Q3
Real money holdings
16
• 4.2 Interest Rates and the Money Supply
– An increase (fall) in the money supply lowers (raises) the interest rate, given the price level and output.
Ms/P = L(R,Y) (3-4)
15
Figure 3-3: Determination of the Equilibrium Interest Rate
Interest rate, R Real money supply 2
R2
R1 R3
1 3
Aggregate real money demand, L(R,Y)
– Changes in the risk of holding money need not cause individuals to reduce their demand for money.
• Any change in the riskiness of money causes an equal change in the riskiness of bonds.
5
• 1.4What Is Money?
– Assets widely used and accepted as a means of payment. – Money is very liquid, but pays little or no return.
• All other assets are less liquid but pay higher return.
Exchange Rate in the Short Run
• Short run analysis
– A generally accepted means of payment
• 1.2Money as a Unit of Account
– A widely recognized measure of value
• 1.3Money as a Store of Value
– A transfer of purchasing power from the present into the future
Chapter Organization
• • • • • Introduction Money Defined: A Brief Review The Demand for Money by Individuals Aggregate Money Demand The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
Interest rate, R Real money supply Increase in real income R2 R1 2 1 1' L(R,Y2) L(R,Y1) MS ( = Q 1 ) P Q2 Real money holdings
20
§5The Money Supply and the
7
§2 The Demand for Money by Individuals
• Three factors influence money demand:
– Expected return – Risk – Liquidity
• 2.1Expected Return
– The interest rate measures the opportunity cost of holding money rather than interestbearing bonds.
• Figure 3-5 shows the effect on the interest rate of a rise in the level of output, given the money supply and the price level.
19
Figure 3-5: Effect on the Interest Rate of a Rise in Real Income
• The effect of increasing the money supply at a given price level is illustrated in Figure 3-4.
17
Figure 3-4: Effect of an Increase in the Money Supply on the Interest Rate
2
Chapter Organization
• The Money Supply and the Exchange Rate in the Short Run • Money, the Price Level, and the Exchange Rate in the Long Run • Summary
9
• 2.3 Liquidity
– The main benefit of holdwenku.baidu.comng money comes from its liquidity.
• Households and firms hold money because it is the easiest way of financing their everyday purchases.
11
– The aggregate demand for money can be expressed by:
Md = P x L(R,Y) (3-1) where: P is the price level Y is real national income L(R,Y) is the aggregate real money demand
– It analyzes the long-term effects of monetary changes on output prices and expected future exchange rates.
4
§1Money Defined: A Brief Review
• 1.1Money as a Medium of Exchange
– Money Supply (Ms) Ms = Currency + Checkable Deposits
6
• 1.5How the Money Supply Is Determined
– An economy’s money supply is controlled by its central bank. • The central bank: –Directly regulates the amount of currency in existence –Indirectly controls the amount of checking deposits issued by private banks
14
§4The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
• 4.1 Equilibrium in the Money Market
– The condition for equilibrium in the money market is: Ms = Md (3-3) – The money market equilibrium condition can be expressed in terms of aggregate real money demand as:
– A rise in the average value of transactions carried out by a household or firm causes its demand for money to rise.
10
§3 Aggregate Money Demand
• 3.1Aggregate money demand
– The total demand for money by all households and firms in the economy. – 3.2 It is determined by three main factors:
• Interest rate –It reduces the demand for money. • Price level –It raises the demand for money. • Real national income –It raises the demand for money.
13
Figure 3-2: Effect on the Aggregate Real Money Demand Schedule of a Rise in Real Income
Interest rate, R
Increase in real income
L(R,Y2) L(R,Y1) Aggregate real money demand
• A rise in the interest rate raises the cost of holding money and causes money demand to fall.
8
• 2.2Risk
– Holding money is risky.
• An unexpected increase in the prices of goods and services could reduce the value of money in terms of the commodities consumed.
• Equation (14-1) can also be written as:
Md/P = L(R,Y) (3-2)
12
Figure 3-1: Aggregate Real Money Demand and the Interest Rate
Interest rate, R
L(R,Y)
Aggregate real money demand