文档介绍：© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard
Output, the Interest Rate, and the Exchange Rate
The model developed in this chapter is an extension of the open economy IS-LM model, known as the Mundell-Fleming model.
The main questions we try to solve are:
What determines the exchange rate?
How can policy makers affect exchange rates?
© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard
Equilibrium in the Goods Market
Equilibrium in the goods market can be described by the following equations:
20-1
© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard
Equilibrium in the Goods Market
Consumption C depends positively on disposable e Y-T.
Investment I depends positively on output Y, and negatively on the real interest rate r.
Government spending G is taken as given.
The quantity of imports IM depends positively on both output Y and the real exchange rate .
Exports X depend positively on foreign output Y* and negatively on the real exchange rate .
© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard
Equilibrium in the Goods Market
The main implication of this equation is that both the real interest rate and the real exchange rate affect demand and, in turn, equilibrium output:
An increase in the real interest rate leads to a decrease in investment spending, and to a decrease in the demand for domestic goods.
An increase in the real exchange rate leads to a shift in demand toward foreign goods, and to a decrease exports.
© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Olivier Blanchard
Equilibrium in the Goods Market
In this chapter we make two simplifications:
Both the domestic and the foreign price levels are given; thus, the nominal and the real exchange rate move together:
There is no inflation, neither actual nor expected.
Then, the equilibrium condition es:
© 2006 Prentice Hall Business Publishing Macroeconomics, 4/e Oli